The recovery in cyclical stocks has ramped up

Sources: © 2021 – Morningstar Direct, All Rights Reserved1 and Wells Fargo Investment Institute. Daily data from October 28, 2020 to September 30, 2021. The S&P 500 Index is a market-capitalization-weighted index considered representative of the U.S. stock market. An index is unmanaged and not available for direct investment. The cyclical index is the average growth across the sector indices for each period of the S&P 500 financials, energy, industrials, real estate, and materials sectors. The defensive index is the average growth across the sector indices for each period of the S&P 500 health care, utilities, and consumer staples sectors. The growth index is the average growth across the sector indices for each period of the S&P 500 communication services, consumer discretionary, and information technology. Past performance is no guarantee of future results. Equity securities are subject to market risk which means their value may fluctuate in response to general economic and market conditions and the perception of individual issuers. Investments in equity securities are generally more volatile than other types of securities. See “Index Definitions and Asset Class Risk Disclosures” link above for equity sector risks.

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Key Takeaways

  • Based on our outlook for a strengthening economic recovery, we favor cyclical sectors such as Financials and Industrials. We believe the cyclical rally is sustainable through the end of 2021.