Weekly Commentary

Ed Mertiri |

Market Perspective: Schwab Market Perspective: Moving, With Bottlenecks

By Liz Ann Sonders, Senior Vice President, Chief Investment Strategist, Charles Schwab & Co, Inc; By Jeffrey Kleintop Senior Vice President, Chief Global Investment Strategist;

March, 2021

Key Points: U.S. economic growth is accelerating as vaccinations rise and social-distancing measures ease, but hopes for a long-lasting spending boom may hit a couple of speed bumps. Vaccine rollouts in major countries are proceeding at different speeds, but stock market performance contradicts what vaccination data would seem to imply for investors. Meanwhile, inflation adjusted longer-term Treasury yields have risen as investors anticipate stronger economic growth.

Click here to read more


Sector Rating Updates:


Consumer Discretionary: Marketweight

Key Points

  • Tesla and Amazon led Consumer Discretionary lower in February.
  • The sector's COVID laggards have been strong to begin the year.
  • Sector model is marketweight, matching our recommendation.
Click here to read more

Energy: Marketweight

Key Points

  • WTI was up 18% in February and has now risen 27% in 2021.
  • The physical oil market has firmed up and the Total Petroleum Inventory Model is on a buy.
  • We have Energy on watch for an upgrade.
Click here to read more

Materials: Marketweight

Key Points

  • Chemicals, the largest industry, has been weak to begin 2021.
  • Materials' Emerging/Developed Equity Momentum indicator turned bullish on January 21.
  • Higher oil prices and a stronger dollar are headwinds for the sector.
Click here to read more

Utilities: Underweight

Key Points

  • Rising rates and steepening yield curve are bearish for bond proxy sectors.
  • Utilities' dividend yield is falling relative to the 10-year Treasury.
  • A choppy market could benefit defensive sectors, but our base case is for a continuation of the bull market.
Click here to read more

Financials: Overweight

Key Points

  • Financials was the second-best performing sector in February.
  • Higher rates and a steeper yield curve are positives, pandemic loan growth is a negative.
  • The sector model upgraded Financials to overweight in February, matching our recommendation.
Click here to read more

Health Care: Marketweight

Key Points

  • Second-worst performing sector in February.
  • High levels of uncertainty surround sector following new presidential party leadership.
  • Overall sector model composite score is the lowest in almost four years.
Click here to read more

Industrials: Overweight

Key Points

  • Our Airlines Scorecard turned bullish in February.
  • Congress likely to shift focus to infrastructure following the COVID relief package.
  • Size and funding of bill will likely prove biggest challenges.
Click here to read more

IT: Marketweight

Key Points

  • Technology has been in a tight relative trading range since September.
  • Hardware weakness has been partially offset by strength in Semiconductors.
  • Breadth deterioration could be an early warning of a breakdown
Click here to read more

Real Estate: Marketweight

Key Points

  • Sector model and REITs Industry Scorecard have bullish macro indicators, but bearish technical indicators.
  • The REITs Industry Trend Model is overweight Hotel &Resort REITs.
  • Mean reversion potential makes the sector a top bounce back candidate.
Click here to read more

Consumer Staples: Underweight

Key Points

  • FANMAG broke back below its September 2 high on February 22.
  • Media-related names have been strong, telecom-related weak, and tech-related rangebound.
  • Sector model has bullish external and bearish internal composites.
Click here to read more

Communication Services: Marketweight

Key Points

  • Consumer Staples' five largest companies are trading below their relative 200-day moving averages.
  • Consumer Staples is currently the most negative-rate sensitive among all sectors.
  • The sector's median growth estimates for FY 2021 and FY 2022are well below the S&P 500.
Click here to read more