Quarterly Sector Update - Fidelity Investments
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LEADERSHIP SERIES THIRD QUARTER 2018 Quarterly Sector Update PRIMARY CONTRIBUTORS Fidelity Management & Research Company, Equity Division
SECTOR UPDATE
Scorecard: Technology and Discretionary Remain on Top
The S&P 500 has traded in a fairly narrow range through the first half of 2018, gaining 2.6%. Technology, consumer
discretionary, and energy top the scorecard, and cyclicals are likely to remain in favor as the corporate profit
recovery remains intact. Consumer discretionary had the strongest YTD returns and energy was Q2’s top
performer, driven by a sharp rise in oil prices. Conversely, real estate and utilities continue to face headwinds.
Longer Time Horizon View Shorter Performance as of 6/30/18
Weight in
Business Relative Relative S&P 500® Latest Year Dividend
Sector Cycle Fundamentals Valuations Strength Index Quarter to Date Yield
Consumer
Discretionary + – + 12.9% 8.2% 11.5% 1.2%
Consumer Staples – 6.7% -1.5% -8.5% 3.1%
Energy + + 6.3% 13.5% 6.8% 2.6%
Financials – + 14.2% -3.2% -4.1% 1.7%
Health Care 13.9% 3.1% 1.8% 1.6%
Industrials + – – 9.9% -3.2% -4.7% 2.0%
Information
Technology + + – + 26.0% 7.1% 10.9% 1.1%
Materials – + 2.8% 2.6% -3.1% 2.0%
Real Estate – 2.7% 6.1% 0.8% 3.3%
Telecom + – 1.8% -0.9% -8.4% 5.2%
Utilities – – 2.8% 3.7% 0.3% 3.4%
S&P 500®
3.4% 2.6% 1.8%
Returns
Past performance is no guarantee of future results. Sectors as defined by the Global Industry Classification Standard (GICS ®); see additional information in the appendix. Factors
are based on historical analysis and are not a qualitative assessment by any individual investment professional. Green portions suggest outperformance; red portions suggest
underperformance; unshaded portions indicate no clear pattern vs. the broader market as represented by the S&P 500. Quarterly and year-to-date returns reflect performance of S&P
500 sector indexes. It is not possible to invest directly in an index. All indexes are unmanaged. Percentages may not total 100% due to rounding.
Source: FactSet, Fidelity Investments, as of June 30, 2018.
2SECTOR UPDATE
Fundamentals: Tech, Materials, and Discretionary Still Strong
Cyclical sectors, led by technology, materials, and consumer discretionary continued to show fundamental strength
through Q2. Technology boasted the highest EBITDA growth and FCF margin; materials had impressive EPS and
EBITDA growth; and consumer discretionary’s ROE has been strong. On the other hand, the fundamentals of
financials and some defensive sectors, including real estate and utilities, were weaker relative to the broad market.
EPS Growth (Last 12 Months) EBITDA Growth (Last 12 Months)
150% 25%
100% 20%
15%
50%
10%
0% 5%
-50% 0%
Energy
Financials
Stpls.
Technology
500
Disc.
Telecom
Utilities
Materials
Estate
Care
Industrials
Cons. Disc.
Cons. Stpls.
Cons. Stpls.
Materials
Materials
Cons. Disc.
Energy
Telecom
Utilities
Energy
Utilities
Telecom
S&P 500
Real Estate
Industrials
S&P 500
Financials
Technology
Technology
Industrials
Health Care
Health Care
S&P
Health
Cons.
Cons.
Real
Return on Equity (Last 12 Months) Free-Cash-Flow Margin (Last 12 Months)
30% 30%
20% 20%
10% 10%
0% 0%
Cons. Stpls.
Cons. Disc.
Materials
Energy
Utilities
S&P 500
Technology
Telecom
Health Care
Industrials
Cons. Stpls.
Cons. Disc.
Materials
Utilities
Real Estate
Energy
Technology
Telecom
S&P 500
Financials
Industrials
Health Care
-10%
Fundamentals: Strong and improving fundamentals historically have been an
intermediate-term indicator of sector performance. Fundamental analysis gives
a view of how each sector is doing in terms of growth and profitability.
Past performance is no guarantee of future results. EPS = earnings per share. EBITDA = earnings before interest, taxes, depreciation, and
amortization. The financials and real estate sectors are not represented in the EBITDA Growth or Free-Cash-Flow Margin charts. Note that the
energy sector’s EPS growth (last 12 months) was 661.6%. See the Glossary and Methodology slide for further explanation. Source: FactSet,
3 Fidelity Investments, as of June 30, 2018.SECTOR UPDATE
Relative Valuations: Telecom and Energy Look Cheap
Based on our framework, telecom and energy appear inexpensive relative to their historical averages and to other
sectors, as both sectors have trailed the broader market over the past few years, despite energy’s more recent rally.
Financials also looks attractive from a valuation perspective. Conversely, the valuations of technology, consumer
discretionary, and industrials appear somewhat elevated.
Earnings Yield Free-Cash-Flow Yield
10-Year Range (excl. top & bottom 5%) Current Historical Average 10-Year Range (excl. top & bottom 5%) Current Historical Average
Relative Forward Earnings Yield to S&P 500 Index Relative Free-Cash-Flow Yield to S&P 500 Index
200% 300%
180% 250%
160%
200%
140%
120% 150%
100% 100%
80% 50%
60%
0%
40%
20% -50%
0% -100%
Utilities
Cons. Disc.
Cons. Stpls.
Energy
Technology
Industrials
Telecom
Health Care
Materials
Real Estate
Financials
Utilities
Cons. Disc.
Telecom
Cons. Stpls.
Energy
Technology
Materials
Industrials
Health Care
Relative Valuations: On their own, valuations are not necessarily the best indicator
of sector performance, but when combined with other factors, valuations can be
a useful tool in determining the risk-and-reward profile.
Past performance is no guarantee of future results. Forward earnings yield reflects analysts’ published earnings-per-share estimates for the
next 12 months, divided by market price per share; it is the inverse of the price-to-earnings (P/E) ratio. Free-cash-flow yield reflects free cash flow
divided by market price per share; it is the inverse of the price-to-free-cash-flow ratio. The financials and real estate sectors are not represented in
the Free-Cash-Flow Yield chart. Please see the Glossary and Methodology slide for further explanation. Source: FactSet, Fidelity Investments, as
4 of June 30, 2018.SECTOR UPDATE
Relative Strength: Tech and Discretionary Continued to Lead
Technology and consumer discretionary continued their steady leadership through the first half of 2018, while
energy also outperformed. Defensive sectors such as consumer staples and telecom continued to trail the broader
market, with no clear sign of an impending change in trend. Industrials also lagged over the past six months, but
leading indicators suggest a constructive outlook for the sector moving forward.
Sectors Exhibiting Relative Strength Sectors Exhibiting Relative Weakness
Technology Cons
Cons.Disc.
Disc. Energy Cons. Stpls. Telecom Industrials
Price Relative to S&P 500 Index Price Relative to S&P 500 Index
140 140
130 130 6-month
review
120 120
110 110
100 100
90 90
80 80
70 70
60 6-month 60
review
50 50
Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18
Relative Strength: This indicator compares the performance of each sector with
the performance of the broad market, based on changes in the ratio of the
securities’ respective prices over time.
Past performance is no guarantee of future results. Charts represent performance of specified S&P 500 Sector Indexes relative to the broader
S&P 500 Index. It is not possible to invest directly in an index. All indexes are unmanaged. Source: FactSet, Fidelity Investments, as of June 30, 2018.
5SECTOR UPDATE
If Earnings Come Through as Expected, Stocks Appear Cheap
The conventional wisdom seems to be that valuations are still elevated. But improving earnings estimates have
brought the market’s forward P/E ratio below 16, based on earnings projections for 2019. A P/E of 16 on forward 18-
month earnings is near the average of the last 80 years and in the cheapest quartile of periods since 1990. This may
be bullish for stocks, and for cyclicals in particular, especially if we are in the early stages of profit recovery.
Stock Market Valuations Appear Inexpensive At These Valuations Historically, Stocks Have
Based on 2019 Earnings Estimates Had a High Probability of Advancing
S&P 500 Price/Operating Earnings With Estimates (Ratio) Odds of Stock Market Advance (Next 18 Months, Rolling), Since 1990
35 100%
95.2%
30
95%
25 Estimated
90%
20
85%
15
79.8%
80%
10
75%
5
0 70%
Mar-90
Mar-93
Mar-96
Mar-99
Mar-02
Mar-05
Mar-08
Mar-11
Mar-14
Mar-17
Sep-91
Sep-94
Sep-97
Sep-00
Sep-03
Sep-06
Sep-09
Sep-12
Sep-15
Sep-18
When Forward Full
P/E < 16x Period
Past performance is no guarantee of future results. YTD: year to date. Left chart: Forward price-to-earnings (P/E) ratio: The ratio of a company's
current share price to its operating earnings with estimates (a measure of valuation). Right chart: Full period: average of all rolling 12-month periods
since 1990. Note that since 1990, there have been 21 instances when the S&P 500’s forward P/E ratio was below 16%, representing about 20% of the
periods over that time frame. Source: Haver Analytics, Standard and Poor’s, Fidelity Investments, as of June 30, 2018.
6SECTOR UPDATE
Consumer Discretionary Appears Well Positioned for Gains
As a cyclical sector, consumer discretionary has historically benefited from profit recoveries. Another positive
signal for consumer discretionary can be found in improving wage growth trends, which tend to boost consumer
spending power. This constructive consumer backdrop has helped lift the sector’s performance, bringing it into the
top spot on a YTD return basis. Two key indicators suggest wages will continue to accelerate into 2019.
A Growing Percentage of Small Business Hourly Earnings Have Often Accelerated When
Owners Say They Have Been Raising Wages More Small Businesses Were Raising Wages
Small Business Owners Raising Worker Compensation (Past 3 Mos.) Acceleration in Avg. Hourly Earnings (NTM, By Survey Result Quartiles)
40% 4%
3.1%
35% 3%
30% 2.1%
2%
25%
1%
0.5%
20%
0%
15%
-1%
10%
5% -2%
-2.3%
0% -3%
1st Quartile— 2nd Quartile 3rd Quartile 4th Quartile—
Lowest % Highest %
-5%
Raising Wages Raising Wages
1984
1985
1987
1988
1990
1991
1993
1994
1996
1997
1999
2000
2002
2003
2005
2006
2008
2009
2011
2012
2014
2015
2017
Small Business Survey Results
YTD: year to date. Left chart: National Federation of Independent Business (NFIB) survey of small business owners shows the net percentage of
respondents who say that they have raised worker compensation over the past 3 months. Source: Haver Analytics, NFIB, Fidelity Investments, as of
June 30, 2018. Right chart: Acceleration in average hourly earnings based on NFIB survey results by quartile. Period measured: 1984 to present.
7 Source: Haver Analytics, NFIB, Bureau of Labor Statistics, Fidelity Investments, as of June 30, 2018.SECTOR UPDATE
Two Key Indicators Signal Further Recovery in Corporate Profits
Two important indicators of profit growth have recently turned positive: capital spending (capex) and business
lending. When combined, they have significantly increased the odds of sustained corporate profit growth.
Industrials has particularly benefited from prior capex recoveries. Capex has strengthened recently due in part to
acceleration in commercial and industrial lending, supported by healthy bank balance sheets and low default rates.
Capital Spending Growth Has Turned Positive, Commercial and Industrial Lending has Recently
and Suggests the Profit Recovery Will Continue Recovered, Likely Driving Stronger Capex
Capital Spending of the Top 3,000 Stocks by Market Capitalization (Mil. $) Commercial and Industrial Loan Growth (13-Week Change)
1,200,000 10%
8%
1,000,000
6%
800,000 4%
2%
600,000
0%
400,000 -2%
-4%
200,000
-6%
0 -8%
May-16
May-04
May-06
May-08
May-10
May-12
May-14
May-18
Jan-13
Sep-15
Jan-03
Sep-03
Jan-05
Sep-05
Jan-07
Sep-07
Jan-09
Sep-09
Jan-11
Sep-11
Sep-13
Jan-15
Jan-17
Sep-17
1962
1964
1967
1970
1973
1976
1979
1981
1984
1987
1990
1993
1996
1998
2001
2004
2007
2010
2013
2015
2018
Source: Haver Analytics, Federal Reserve, Fidelity Investments, as of June 30, 2018.
8SECTOR UPDATE
Capex Growth, Valuations Positive for Transportation Stocks
Within industrials, the transportation industry group has historically been a major beneficiary of the nascent stages
of prior capex recoveries. In addition, transportation stocks are currently trading at low valuations relative to their
own history and their profit margins have been in a persistent uptrend—all constructive signals for the industry
group moving forward.
Transportation Stocks Appear Cheap Relative to Expanding Profit Margins Also Suggest a
Their Historical Valuations Positive Outlook for the Industry Group
Transportation Industry Group Relative Price-to-Sales Ratio Transportation Industry Group EBIT Margin
1.2 15%
1.0 13%
Long-Term Trend
0.8 11%
Average
0.6 9%
0.4 7%
0.2 5%
0.0 3%
May-89
Apr-77
Jul-84
Mar-94
Apr-06
Jul-13
May-18
Feb-82
Oct-91
Feb-11
Aug-67
Nov-74
Sep-79
Dec-86
Aug-96
Nov-03
Sep-08
Dec-15
Jan-70
Jun-72
Jan-99
Jun-01
May-89
Oct-91
May-18
Apr-77
Apr-06
Feb-82
Jul-84
Mar-94
Feb-11
Jul-13
Aug-67
Nov-74
Sep-79
Dec-86
Aug-96
Nov-03
Sep-08
Dec-15
Jan-70
Jun-72
Jan-99
Jun-01
Left chart: Relative price-to-sales ratio: the ratio of a company’s current share price to reported sales relative to historical levels (a measure of valuation).
Right chart: EBIT: earnings before interest and taxes. Source: Haver Analytics, Fidelity Investments, as of Jun 30, 2018.
9SECTOR UPDATE
Pricing Power Could Lift Returns of Railroad Stocks
As global profits have recovered since 2017, railroad stocks (within the transportation industry group) have gained
significant pricing power—a key driver of the industry's performance relative to the broader market. When the
industry’s prices have risen at this rate in the past (near the middle of the historical range), railroad stocks have had
a high probability of outperforming, outpacing the market the majority of the time.
Railroad Stocks Have Been Able to Gain Pricing Amid Strong Pricing Power, Railroad Stocks
Power in Recent Years Have Historically Outperformed
Producer Price Index for Line-Haul Railroads (PPI, Year-over-Year Change) Odds of Rail Stocks Outperforming the Market By PPI Quartile (NTM)
20%
90% 84%
15% 80%
70% 67% 66%
10%
60%
53%
50%
5%
Quartiles
2&3 40%
0% 30%
20%
-5%
10%
-10% 0%
07-Feb
08-Dec
09-Nov
18-Feb
04-May
Dec-97
Nov-98
Oct-99
10-Oct
15-May
Sep-00
01-Aug
06-Mar
11-Sep
12-Aug
17-Mar
02-Jul
05-Apr
16-Apr
03-Jun
09-Jan
13-Jul
14-Jun
Quartile 1— Quartile 2 Quartile 3 Quartile 4—
Lowest Highest
PPI YoY % Change
Past performance is no guarantee of future results. Left chart: Producer price index (a weighted index of prices at the wholesale, or producer, level
by industry) for line-haul railroads, not seasonally adjusted. Dotted lines indicate the middle two quartiles of the historical PPI year-over-year percentage
change, representing somewhat of a “sweet spot” for the industry’s pricing power. Source: Haver Analytics, Bureau of Labor Statistics, Fidelity
Investments, as of June 30, 2018. Right chart: Period measured: 1962 to present. Performance relative to the top 3,000 stocks by market
10 capitalization. Source: Haver Analytics, Fidelity Investments, as of June 30, 2018.SECTOR UPDATE
Can Technology Stocks Continue Their Run?
Despite concerns about whether technology stocks can continue to outperform, a number of constructive signals
bode well for the sector. For example, the sector’s current forward P/E ratio is relatively low compared to history
and its profit margins have surpassed prior peaks, suggesting a strong backdrop for the sector moving forward.
Technology Valuations Appear Inexpensive And Its Profit Margins Have Surpassed Prior
Relative to the Sector’s History Peaks—A Positive Signal for the Sector
Technology Relative Forward P/E Ratio Technology EBIT Margin
4.0 25%
3.5
20%
3.0
2.5 15%
2.0
10%
1.5 Average
1.0
5%
0.5
0.0 0% Jul-67
May-72
Mar-77
May-01
Apr-89
Jul-96
Mar-06
Apr-18
Oct-74
Feb-94
Oct-03
Dec-69
Aug-79
Nov-86
Sep-91
Dec-98
Aug-08
Nov-15
Jan-11
May-81
May-88
May-95
May-02
May-09
May-16
Jan-82
Jun-84
Jun-13
Feb-76
Feb-83
Feb-90
Feb-97
Feb-04
Feb-11
Feb-18
Nov-77
Aug-79
Nov-84
Aug-86
Nov-91
Aug-93
Nov-98
Aug-00
Nov-05
Aug-07
Nov-12
Aug-14
Left chart: Forward P/E ratio relative to the sector’s history. Right chart: EBIT: earnings before interest and taxes. Source: Haver Analytics, Fidelity
Investments, as of June 30, 2018.
11SECTOR UPDATE
Tech Leadership Not Outsized Compared to Prior Top Sectors
Although technology has led the market for some time, its excess returns over the last 12 months were significantly
lower than the average annual outperformance of market-leading sectors dating back to 1962. In fact, the average
top-performing sector outpaced the broader market by approximately 20% in a given year, twice the magnitude of
technology’s 10% lead over the broader market during the past 12 months.
Technology’s Outperformance Over the Last 12 Months Has Been About
Half That of the Average Top-Performing Sectors Since 1962
Sector Relative Returns (Avg. 1-Year Historical Returns by Sector Ranking vs. Sector Returns and Rankings over the Last 12 Months)
Average Relative Return Return Over the Last 12 Months
25%
20%
15%
TEC
10%
5% FIN
CND
0%
HTH ENE
-5% MAT IND
-10% UTL
-15% RE
TEL
-20% CNS
-25%
1 2 3 4 5 6 7 8 9 10 11
Sector Performance Rankings
Past performance is no guarantee of future results. Blue bars represent historical average annual returns relative to the top 3,000 stocks by market
capitalization by sector performance ranking, since 1962. Green bars show the performance over the last 12 months of each of the 11 sectors, and their
12 current performance rankings. Source: Haver Analytics, Fidelity Investments, as of June 30, 2018.Glossary and Methodology
Glossary Methodology
Bear Market: At least a 20% correction in the stock market. Business Cycle: The business cycle as used herein reflects fluctuation of activity in the U.S.
economy and is based on Fidelity’s analysis of historical trends.
Cycle Hit Rate: Calculates the frequency of a sector outperforming the broader equity market
over each business cycle phase since 1962. Fundamentals: Sector rankings are based on equally weighting the following four fundamental
factors: EBITDA growth, earnings growth, ROE, and FCF margin. However, we evaluate the
Dividend Yield: Annual dividends per share divided by share price. financials and real estate sectors only on earnings growth and ROE because of differences in
Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA): A non-GAAP their business model and accounting standards.
measure often used to compare profitability between companies and industries, because it Relative Strength: Compares the strength of a sector versus the S&P 500 Index over a six-
eliminates the effects of financing and accounting decisions. month period, with a one-month reversal on the latest month; identifying relative strength
Earnings per Share Growth: Measures the growth in reported earnings per share over the patterns can be a useful indicator for short-term sector performance.
specified past time period. Relative Valuations: Valuation metrics for each sector are relative to the S&P 500. Ratios
Earnings Yield: Earnings per share divided by share price. It is the inverse of the price-to- compute the current relative valuation divided by the 10-year historical average relative
earnings (P/E) ratio. valuation, eliminating the top 5% and bottom 5% values to reduce the effect of potential outliers.
Sectors are then ranked by their weighted average ratios, weighted as follows: P/E: 35%; P/B:
Free Cash Flow (FCF): The amount of cash a company has remaining after expenses, debt 20%; P/S: 20%; FCF yield: 20%; and dividend yield: 5%. However, the financials and real estate
service, capital expenditures, and dividends. High free cash flow typically suggests stronger sectors are weighted as follows: P/E: 59%; P/B: 33%; and dividend yield: 8%.
company value.
Free-Cash-Flow Yield: Free cash flow per share divided by share price. A high FCF yield often
Primary Contributors
represents a good investment opportunity, because investors would be paying a reasonable Fidelity Management & Research Company, Equity Division: The Equity division within
price for healthy cash earnings. Fidelity Asset Management consists of 11 portfolio groups, as well as Select and Advisor Focus
sector portfolios. Each group is responsible for portfolio management supported by in-depth
Full-Phase Average Performance: Calculates the (geometric) average performance of a
fundamental research.
sector in a particular phase of the business cycle and subtracts the performance of the broader
equity market.
Median Monthly Difference: Calculates the difference in the monthly performance of a sector
compared with the broader equity market, and then takes the midpoint of those observations.
Price-to-Book (P/B) Ratio: The ratio of a company’s share price to reported accumulated
profits and capital.
Price-to-Earnings (P/E) Ratio: The ratio of a company's current share price to its reported
earnings. A forward P/E ratio typically uses an average of analysts’ published earnings
estimates for the next 12 months.
Price-to-Sales (P/S) Ratio: The ratio of a company’s current share price to reported sales.
Relative Strength: The comparison of a security’s performance relative to a benchmark,
typically a market index.
Return on Equity (ROE): The amount, expressed as a percentage, earned on a company’s
common stock investment for a given period.
Risk Decomposition: A mathematical analysis that estimates the relative contribution of
various sources of volatility.
13Appendix
Unless otherwise disclosed to you, any investment or management recommendation in Business Cycle Definition: The typical business cycle depicts the general pattern of
this document is not meant to be impartial investment advice or advice in a fiduciary economic cycles throughout history, though each cycle is different. In general, the
capacity, is intended to be educational, and is not tailored to the investment needs of typical business cycle demonstrates the following:
any specific individual. Fidelity and its representatives have a financial interest in any
investment alternatives or transactions described in this document. Fidelity receives Early cycle: The economy bottoms and picks up steam until it exits recession, then
compensation from Fidelity funds and products, certain third-party funds and products, begins the recovery as activity accelerates. Inflationary pressures are typically low,
and certain investment services. The compensation that is received, either directly or monetary policy is accommodative, and the yield curve is steep.
indirectly, by Fidelity may vary based on such funds, products, and services, which can Mid cycle: The economy exits recovery and enters into expansion, characterized by
create a conflict of interest for Fidelity and its representatives. Fiduciaries are solely broader and more self-sustaining economic momentum but a more moderate pace of
responsible for exercising independent judgment in evaluating any transaction(s) and growth. Inflationary pressures typically begin to rise, monetary policy becomes tighter,
are assumed to be capable of evaluating investment risks independently, both in and the yield curve experiences some flattening.
general and with regard to particular transactions and investment strategies.
Late cycle: Economic expansion matures, inflationary pressures continue to rise, and
Information presented herein is for discussion and illustrative purposes only and is not a the yield curve may eventually become flat or inverted. Eventually, the economy
recommendation or an offer or solicitation to buy or sell any securities. Views expressed contracts and enters recession, with monetary policy shifting from tightening to easing.
are as of the date indicated, based on the information available at that time, and may
change based on market and other conditions. Unless otherwise noted, the opinions Please note that there is no uniformity of time among phases, nor is the chronological
provided are those of the authors and not necessarily those of Fidelity Investments or its progression always in this order. For example, business cycles have varied between 1
affiliates. Fidelity does not assume any duty to update any of the information. and 10 years in the U.S., and there have been examples when the economy has
skipped a phase or retraced an earlier one.
References to specific investment themes are for illustrative purposes only and should
not be construed as recommendations or investment advice. Investment decisions Market Indexes: The Bloomberg Barclays U.S. Corporate High Yield Bond Index is a
should be based on an individual’s own goals, time horizon, and tolerance for risk. market value-weighted index that covers the universe of dollar-denominated, fixed-rate,
non-investment-grade debt.
This piece may contain assumptions that are “forward-looking statements,” which are
based on certain assumptions of future events. Actual events are difficult to predict and The FTSE NAREIT All Equity REITs Index is a market capitalization-weighted index that
may differ from those assumed. There can be no assurance that forward-looking is designed to measure the performance of tax-qualified Real Estate Investment Trusts
statements will materialize or that actual returns or results will not be materially different (REITs) that are listed on the New York Stock Exchange, the NYSE MKT LLC, or the
from those described here. NASDAQ National Market List with more than 50 percent of total assets in qualifying
real estate assets secured by real property. Mortgage REITs are excluded.
Past performance is no guarantee of future results.
The S&P 500® Index is a market capitalization-weighted index of 500 common stocks
Investing involves risk, including risk of loss. chosen for market size, liquidity, and industry group representation to represent U.S.
All indexes are unmanaged. You cannot invest directly in an index. Index or benchmark equity performance. S&P 500 is a registered service mark of Standard & Poor’s
performance presented in this document does not reflect the deduction of advisory fees, Financial Services LLC. Sectors and industries are defined by the Global Industry
transaction charges, and other expenses, which would reduce performance. Classification Standard (GICS).
Stock markets are volatile and can decline significantly in response to adverse issuer, The MSCI World ex. U.S. Index is a market capitalization-weighted index designed to
political, regulatory, market, or economic developments. measure the investable equity market performance for global investors of large cap
stocks in developed markets, excluding the United States.
Because of its narrow focus, sector investing tends to be more volatile than investments
that diversify across many sectors and companies. Sector investing is also subject to
the additional risks associated with its particular industry.
14Appendix
The S&P 500 sector indices include the standard GICS sectors that make up the S&P Third-party marks are the property of their respective owners; all other marks are the
500 Index. The market capitalization of all S&P 500 sector indexes together comprises property of FMR LLC.
the market capitalization of the parent S&P 500 Index; each member of the S&P 500
Index is assigned to one (and only one) sector. If receiving this piece through your relationship with Fidelity Institutional Asset
Management® (FIAM), this publication is provided by Fidelity Investments Institutional
Sectors are defined as follows: Consumer Discretionary: companies that provide Services Company, Inc.
goods and services that people want but don’t necessarily need, such as televisions,
cars, and sporting goods; these businesses tend to be the most sensitive to economic If receiving this piece through your relationship with Fidelity Personal & Workplace
cycles. Consumer Staples: companies that provide goods and services that people use Investing (PWI) or Fidelity Family Office Services (FFOS), this publication is provided
on a daily basis, like food, household products, and personal-care products; these through Fidelity Brokerage Services LLC, Member NYSE, SIPC.
businesses tend to be less sensitive to economic cycles. Energy: companies whose If receiving this piece through your relationship with Fidelity Clearing & Custody
businesses are dominated by either of the following activities: the construction or Solutions or Fidelity Capital Markets, this publication is for institutional investor or
provision of oil rigs, drilling equipment, or other energy-related services and equipment, investment professional use only. Clearing, custody, or other brokerage services are
including seismic data collection; or the exploration, production, marketing, refining, provided through National Financial Services LLC or Fidelity Brokerage Services LLC,
and/or transportation of oil and gas products, coal, and consumable fuels. Financials: Member NYSE, SIPC.
companies involved in activities such as banking, consumer finance, investment banking
and brokerage, asset management, and insurance and investments. Health Care: 850789.1.0
companies in two main industry groups: health care equipment suppliers and © 2018 FMR LLC. All rights reserved.
manufacturers, and providers of health care services; and companies involved in the
research, development, production, and marketing of pharmaceuticals and
biotechnology products. Industrials: companies whose businesses manufacture and
distribute capital goods, provide commercial services and supplies, or provide
transportation services. Materials: companies that are engaged in a wide range of
commodity-related manufacturing. Real Estate: companies in two main industry
groups—real estate investment trusts (REITs), and real estate management and
development companies. Technology: companies in technology software and services
and technology hardware and equipment. Telecommunication Services: companies
that provide communications services primarily through fixed-line, cellular, wireless,
high-bandwidth, and/or fiber-optic cable networks. Utilities: companies considered to be
electric, gas, or water utilities, or companies that operate as independent producers
and/or distributors of power.
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