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EQUITY SECTOR STRATEGY AKA The Recovery Rotation

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EQUITY SECTOR STRATEGY AKA The Recovery Rotation

By Kristin Hovencamp

Kristin Hovencamp is an Investment Consultant and Director of Business Development at Hazlett Wealth Management, LLC. HAZLETT WEALTH MANAGEMENT, LLC is independent of Raymond James and is not a registered broker/dealer. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. 675 Sun Valley Road Ketchum, Idaho, 208.726.0605. HazlettWealthManagement.com

Equity sectors define large segments of our economy. Within the Standard & Poors 500 Stock Index are 11 discrete sectors. Different sectors of the stock market fare better than others as the economy progresses from trough to peak. Here’s how we anticipate the sectors will perform during a recovery.

Consumer Discretionary. As consumers feel more secure about spending money, discretionary products and services tend to outperform.

Industrials. Driven by supply and demand, the industrials sector is one of the best levered to economic recovery.

Information Technology. Technology is expected to show its continued fundamental strength through the current stay-at-home environment. Global demand can continue to drive growth.

Communication Services. Strong growth trends of interactive media and entertainment, as well as traditional industries, present opportunities as the economy reopens.

Health Care. This defensive sector is well-positioned for short- and long-term trends of growth.

Financials. With modest interest rate increases limiting net interest margins, banks’ profitability may be a challenge for now. The subsectors — asset management, capital markets, financial exchanges, and fin-tech — are well poised.

Energy. Energy may benefit most from rotational shifts. Patience is vital as we assess the economic environment.

Basic Materials. A weakening dollar and a rise in commodity prices would help materials flourish in a recovering economy.

Real Estate. Relative performance for the real estate sector has been lackluster. Subsectors of real estate such as data centers, towers, timber, self-storage, and apartments are not as challenged as others, such as lodging, retail, and office.

Consumer Staples and Utilities. These defensive sectors are expected to lag the overall equity market as the economy reopens.

Most investors should seek diversity to balance risk versus reward. For this reason, even the least-favored sectors may be appropriate for portfolios seeking a more balanced equity allocation. Those investors seeking a more aggressive investment style may choose to overweight the preferred sectors and entirely avoid the least-favored sectors.

Kristin Hovencamp is an Investment Executive, and Director of Business Development with HAZLETT WEALTH MANAGEMENT, LLC, independent of Raymond James and is not a registered broker/dealer. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Securities are offered through Raymond James Financial Services, Inc., member FINRA/SIPC. 675 Sun Valley Road, Suite J1 + J2 Ketchum, Idaho 83340 208.726.0605. HazlettWealthManagement.com

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