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Page 1:
Economic Review and Forecast
Is It Really This Good?
by David Wyss
Page 2:
Sector Perspective
Does Sector Rotation Signal Recession?
by Sam Stovall
Page 3:
Sector Spotlight
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Sector |
Outlook |
Opinion |
| Electronics |
Positive |
Chip inventory levels are returning to more moderate levels, providing a more favorable growth environment, in our view. |
| Energy Services |
Positive |
Continued high levels of capital spending by oil and gas producers is expected to drive demand for O&G services. |
| Precious Metals |
Positive |
Higher sales and EPS for this group in 2008 (despite slowing production volumes) should be aided by a weakening dollar. |
| Utilities |
Positive |
Elevated valuations will likely be offset by strong EPS growth forecasts, defensive characteristics and strong momentum. |
| Technology |
Positive |
Large international exposure should propel double-digit EPS growth in 2008, despite GDP slowdown seen in the U.S. |
| Basic Materials |
Neutral |
Robust emerging market GDP growth is expected to keep commodity prices elevated, thereby likely helping profits. |
| Biotechnology |
Neutral |
We see a more conservative, and potentially overwhelmed, FDA contributing to an already narrow industry pipeline. |
| Consumer Staples |
Neutral |
The group should be supported by its high international exposure and modest 2008 operating EPS growth estimates. |
| Energy |
Neutral |
Oil demand continues to increase, with the biggest upticks likely seen in China, the Middle East, and North America. |
| Internet |
Neutral |
Ongoing price reductions in response to increasing competition, high shipping costs, and increasing marketing expenses. |
| Leisure |
Neutral |
The cyclicality of entertainment stocks will likely be offset by the defensiveness and dividend yield of tobacco issues. |
| Retailing |
Neutral |
Consumer spending growth is expected to moderate in 2008 on a decline in home prices and higher gasoline prices. |
| Telecom Services |
Neutral |
Improving outlook as a result of strengthening cash flow from wireless operations, combined with a high dividend yield. |
| Transportation |
Neutral |
Despite moderating economic growth prospects, we expect to see modest volume increases and price advances. |
| Banks |
Negative |
A possible decline in lending due to sub-prime concerns, plus narrow net interest margins, should hold back the group. |
| Financial Services |
Negative |
Sub-prime worries and eroding bank credit quality, combined with below market earnings growth estimates for 2008. |
| Health Care |
Negative |
Large-cap companies are focusing more on cost reductions than revenue growth; election rhetoric hints at cost controls. |
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Past performance is no guarantee of future results.
All sector and industry investment outlooks are prepared by Standard & Poor's and represent appreciation potential for the coming three- to 12-month period. A "positive," "buy" or "overweight" outlook indicates the potential to outperform the S&P 500® Composite Index. A "neutral," "hold" or "marketweight" outlook indicates the potential to keep pace with the S&P 500. A "negative," "sell" or "underweight" outlook indicates the potential to underperform the S&P 500. The outlooks are based on S&P's Stock Appreciation Ranking System (STARS), S&P's proprietary investment evaluation measurement. Industry STARS are averages of STARS rankings assigned to the component companies within the industry indices. Copyright © 2001, The McGraw-Hill Companies, Inc. Standard & Poor's is a division of The McGraw-Hill Companies, Inc., 55 Water Street, New York, NY, 10041. The opinions and recommendations expressed in S&P Sector Wire are solely those of Standard & Poor's and in no way represent the advice, opinion or recommendations of Rydex Investments, its affiliates or related companies. Because of the possibility of human or mechanical error by Standard & Poor's sources, Standard & Poor's or others, Standard & Poor's cannot guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. The content of S&P Sector Wire is provided by Standard & Poor's Investment Advisory Services Group. This group operates independently of, and has no access to information obtained by S&P's Ratings Group, which may, in its regular operations, obtain information of a confidential nature. Nothing contained herein should be construed as a solicitation to buy or sell any securities. This information is subject to change at any time, based on market and other conditions.
Sector funds may not be suitable for all investors. Investing in sector funds is more volatile than investing in broadly diversified funds, as there can be greater risk due to the concentration of the funds' holdings in issuers of the same or similar offerings.
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