SECOND QUARTER 2016

Quarterly
Sector Update
PRIMARY CONTRIBUTORS
Asset Allocation Research Team (AART)
Fidelity Management & Research Company Equity Division
Fidelity SelectCo

 SECTOR UPDATE

What Is Fidelitys Quarterly Sector Update?

The Quarterly Sector Update, including the Sector Scorecard, represents input from three distinct Fidelity investment
teamseach with unique insights about sector investingto present a comprehensive view of the performance potential
of the 10 major equity market sectors.

The Sector Scorecards proprietary methodology measures the relative

attractiveness of each sector against five key factors:
business cycle, fundamentals, relative valuations,
momentum, and relative strength.
The investment teams whose members contribute to the Quarterly Sector Update include:

Asset Allocation
Research Team

Fidelity Management &

Research Company

Fidelity SelectCo

Equity Division

The Quarterly Sector Update is intended as a tool for investors to set context and perspective when evaluating the current state of market sectors. It is
not meant to serve as a direct prediction regarding the future performance of any economic or financial market. It is not intended to predict or guarantee
future investment performance of any sort.

 SECTOR UPDATE

Scorecard: Positives for Telecom, Tech, Staples, and Industrials

As the U.S. economy experiences a mix of mid- and late-cycle indicators, defensive sectors may be returning to favor. In Q1,
for example, Telecom, Consumer Staples, and Utilities all gained momentum, while the momentum and relative strength of
Tech and Consumer Discretionary fell from positive to neutral. No metrics for Energy and Materials are positive at this time.

Time Horizon View

Longer

Business
Cycle

Sector
Consumer
Discretionary

Fundamentals

Relative
Valuations

Consumer Staples

Energy

Financials

Shorter

Momentum

Technology

Materials

Telecom
Utilities

Weight in
S&P 500
Index

Latest
Quarter

Year to
Date

Dividend
Yield

12.9%

1.6%

1.6%

1.6%

10.4%

5.6%

5.6%

2.6%

6.8%

4.0%

4.0%

3.1%

15.6%

5.1%

5.1%

2.2%

14.3%

5.5%

5.5%

1.8%

10.1%

2.1%

2.1%

2.1%

20.8%

2.6%

2.6%

1.6%

2.8%

3.6%

3.6%

2.3%

Health Care
Industrials

Relative
Strength

Performance as of 3/31/16

2.8%

16.6%

16.6%

4.5%

3.5%

15.6%

15.6%

3.5%

S&P 500
Returns

1.4%

1.4%

2.2%

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 Indices. It is not possible to invest directly in
an index. All indices are unmanaged. Percentages may not sum to 100% due to rounding. Source: FactSet, Fidelity Investments, as of 3/31/16.

 SECTOR UPDATE

Industries: Top Five & Bottom Five Performers This Quarter

In Q1, 49 of the 67 industries that compose the MSCI USA Investable Market Index (IMI) had positive total returns and 46
outperformed the MSCI IMIs 0.94% gain. All industries within the Utilities, Telecom, Energy, and Consumer Staples sectors
were positive, while some industries within Financials and Health Care posted the quarters lowest returns.

Top 5 Industries QTD

Sector

Drivers

Bottom 5 Industries QTD

Biotechnology

Real Estate
Management &
Development

Sector

Drivers

17%

Health Care

Political rhetoric on
drug pricing weighed
on optimism and
depressed multiples

12%

Financials

Reduced investor
expectations amid
market volatility

Metals & Mining

26%

Materials

Recovery in metals
commodity prices
during the quarter

Leisure
Products

16%

Consumer
Discretionary

Good fundamentals
and favorable yearahead outlook

Utilities

Investors preferred
this higher-yielding
industry

Banks

12%

Financials

Telecom Services

Investors sought
safety and yield
here amid volatile
start to year

Capital Markets

11%

Financials

Challenged
fundamentals amid
slowing global growth

Utilities

This higher-yielding,
defensive industry
appealed to
investors

10%

Consumer
Discretionary

Investors took profits

in this industry
following a strong
2015

Multi-Utilities

Diversified
Telecommunication
Services

Electric Utilities

16%

16%

15%

Internet & Catalog

Retail

Budding credit
concerns and lower
interest outlook

Parent Index: MSCI USA IMI. The MSCI USA IMI rose by 0.94% during Q1. Past performance is no guarantee of future results. Return data show total
return. Source: Morningstar, FactSet, Fidelity Investments, as of 3/31/2016.

 SECTOR UPDATE

U.S. Business Cycle: Mix of Mid- and Late-Cycle Dynamics

U.S. recession risks remain low, but late-cycle indicators have risen in recent months. In the current environment, by
choosing a blended portfolio of select sectors that have historically performed well during either the mid- or late-cycle phase,
it may be possible to generate excess returns.

Snapshot of U.S. Business Cycle

Historical Performance Patterns

Sector

Financials
Consumer
Discretionary
Technology
Industrials

Early

Mid

Late

++

--

++

+
--

Materials

Recession

--

---

++

Consumer
Staples

++

Health Care

++

++

Energy

--

++

Telecom

--

Utilities

--

++
-

++

Business Cycle: Understanding where we are in the business cycle

may help determine which sectors may outperform or underperform during this time.
Past performance is no guarantee of future results. LEFT: Indicates the current business cycle of the U.S. economy based on Fidelity's analysis of
historical trends. This is a hypothetical illustration of a typical business cycle. There is not always a chronological progression in this order, and there have
been cycles when the economy has skipped a phase or retraced an earlier one. See the latest Business Cycle Update for a complete discussion. Source:
Fidelity Investments (AART), as of 3/31/2016. RIGHT: Unshaded portions indicate no clear pattern of out- or underperformance vs. the broader market, as
represented by the top 3,000 U.S. stocks by market capitalization. Double +/ signs indicate that the sector has shown a consistent signal across all three
metrics: full-phase average performance, median monthly difference, and cycle hit rate (see Glossary and Methodology slide for definitions). A single +/
sign indicates a less consistent signal. Source: The Business Cycle Approach to Equity Sector Investing, Fidelity Investments (AART), Sep. 2014.

 SECTOR UPDATE

Fundamentals: Telecom and Consumer Discretionary Strong

Energy

Industrials

S&P 500

Technology

Cons. Stpls.

Utilities

Health Care

Cons. Disc.

Telecom

Energy

Materials

Utilities

S&P 500

Industrials

Cons. Disc.

Health Care

Technology

30%
25%
20%
15%
10%
5%
0%
-5%
-10%

Cons. Stpls.

10%
5%
0%
-5%
-10%
-15%
-20%
Financials

EBITDA Growth (Last 12 Months)

Telecom

EPS Growth (Last 12 Months)

Materials

Fundamentals for Telecommunications have been driven by accelerated earnings per share (EPS) and solid free-cash-flow
margins, while Consumer Discretionary has benefited from strong returns on equity and EBITDA growth. Energy continues to
lag, plagued by an overabundance of oil supply and low commodity prices, and its fundamentals will take more time to turn.

Energy

Utilities

Cons. Stpls.

Cons. Disc.

Materials

Industrials

S&P 500

Health Care

Telecom

-10%

Technology

Financials

Utilities

0%
Energy

0%
S&P 500

10%
Telecom

10%
Materials

20%

Health Care

20%

Technology

30%

Industrials

30%

Cons. Disc.

Free-Cash-Flow Margin (Last 12 Months)

Cons. Stpls.

Return on Equity (Last 12 Months)

Fundamentals: Strong and improving fundamentals historically have been an

intermediate-term indicator of sector performance. Fundamental analysis gives
a view into how each sector is doing in terms of growth and profitability.
EPS bars for Telecom (+49%) and Energy (-71%) and EBITDA bar for Energy (-41%) are broken to better demonstrate scale of all sectors. Telecom
EPS and EBITDA growth largely reflects an industry accounting change and is not representative of typical economic earnings growth. EPS = earnings
per share. EBITDA = earnings before interest, taxes, depreciation, and amortization. Financials sector is not represented in the EBITDA Growth or
Free-Cash-Flow Margin charts. See the Glossary and Methodology slide for further explanation. Source: FactSet, Fidelity Investments, as of 3/31/16.

 SECTOR UPDATE

Relative Valuations: Financials, Tech Are Attractive

Financials is the least expensive sector based on price-to-book and earnings yield, while valuations for Technology remain
favorable as well. Utilities, Consumer Discretionary, and Consumer Staples are pricier by comparison, but not unreasonably
so relative to history. Energy is expensive based on P/E and FCF yield, but is cheap based on P/B and other metrics.

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 (%)

2.0

3.5

1.8

3.0

1.6

2.5

1.4

2.0

1.2

1.5

1.0

Utilities

Telecom

Materials

Technology

Industrials

Health Care

Energy

Cons. Stpls.

Utilities

Telecom

Materials

-1.0

Technology

0.0
Industrials

-0.5
Health Care

0.2
Financials

0.0

Energy

0.4

Cons. Stpls.

0.5

Cons. Disc.

0.6

Cons. Disc.

1.0

0.8

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.
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-tofree-cash-flow ratio. The Financials sector is not represented in the Free-Cash-Flow Yield chart. Please see the Glossary and Methodology slide for
further explanation. Source: FactSet, Fidelity Investments, as of 3/31/16.

 SECTOR UPDATE

Momentum: Defensive-Oriented Sectors Take the Lead

Amid heightened volatility during the second half of 2015 and early 2016, investors turned to more-defensive, less-cyclical
sectors such as Telecom, Consumer Staples, and Utilities, which have seen accelerated price momentum. While Energy and
Materials were momentum laggards entering 2016, both have enjoyed a higher degree of price appreciation more recently.

Momentum Leaders
Consumer Staples

Momentum Laggards

Telecom

Energy

Utilities

Materials

Price Indexed to 100

Price Indexed to 100

160

160

150

150

140

140

130

130

120

120

110

110

100

100

90

90

80

80

70
60
Mar-14

Mar-15

Sep-15

12-month review

70

12-month review
Sep-14

Financials

Mar-16

60
Mar-14

Sep-14

Mar-15

Sep-15

Mar-16

Momentum: Momentum compares the rate of acceleration in the price of securities within
a sector, over time. It can be used to analyze relative sector performance as well as to
evaluate performance for a sector separately from the broader market.
Past performance is no guarantee of future results. Charts show performance of S&P 500 Sector Indices, indexed to 100, from 3/31/14 to 3/31/16.
It is not possible to invest directly in an index. All indices are unmanaged. Source: FactSet, Fidelity Investments, as of 3/31/16.

 SECTOR UPDATE

Relative Strength: Telecom, Staples, Utilities On the Rise

Similar to other metrics for Q1, recent shifts in relative strength generally favor defensive, less economically sensitive
sectors. Telecom, Consumer Staples, and Utilities all improved relative to the broader market in Q1. Financials and Energy
continue to lag, however, while recent price weakness in biotech stocks has weighed on the health care sector.

Sectors Exhibiting Relative Strength

Telecom

Cons. Stpls.

Sectors Exhibiting Relative Weakness

Utilities

Financials

Price Relative to S&P 500 Index

120

110

110

100

100

90

90

80

80

70

6-month
review
Sep-14

Health Care

Price Relative to S&P 500 Index

120

60
Mar-14

Energy

Mar-15

Sep-15

Mar-16

6-month
review

70
60
Mar-14

Sep-14

Mar-15

Sep-15

Mar-16

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 Indices relative to the broader S&P
500 Index. It is not possible to invest directly in an index. All indices are unmanaged. Source: FactSet, Fidelity Investments, as of 3/31/16.

A disciplined business cycle approach to sector allocation can produce active returns by favoring industries that may benefit
from cyclical trends. While the mid-cycle phase generally offers more limited opportunities for relative sector outperformance,
inflation-sensitive sectors historically have provided consistently solid relative performance during the late-cycle phase.

Magnitude of Sector Outperformance (1962 to 2010)

Geometric Average

Median Monthly Difference

Hit Rate

Annualized Relative Performance

Cycle Hit Rate

16%

100%

80%

12%

60%
8%
40%
4%

20%

0%

0%
Technology
Mid Cycle

Energy

Health Care
Late Cycle

Materials

Consumer Staples
Recession

Geometric Average Return is used to calculate average rate per period on investments that are compounded over multiple periods. The typical Business
Cycle depicts the general pattern of economic cycles throughout history, though each cycle is different. Please note there is no uniformity of time among
phases, nor is the chronological progression always in this order. For example, business cycles have varied between one and 10 years in the U.S., and
there have been examples when the economy has skipped a phase or retraced an earlier one. This chart highlights the best-performing sectors in each of
the mid-cycle, late cycle, and recession phases, with an emphasis on the best-performing sectors of the late-cycle given the recent rise in late-cycle
indicators in the U.S. Hit Rate calculates the frequency of a sector outperforming the broader equity market over each business cycle phase since 1962.
Past performance is no guarantee of future results. Sectors as defined by GICS. Source: Haver Analytics, Fidelity Investments (AART), as of 3/31/16.

10

SECTOR UPDATE

Sector Considerations: Think Through the Cycle

 SECTOR UPDATE

Profit Margin Growth Has Stalled Due to Energy Sector

Historically, declining profit margins have often coincided with the late-cycle phase. Faltering cyclical productivity growth,
hampered by wage gains, is often a prelude to margin pressure. However, profit margins have remained high and relatively
steady. In fact, excluding the Energy sector, profit margins have reached a new cycle peak.

S&P 500 Profit Margins

Cyclical Productivity Growth

S&P 500

Change (Year-over-Year)
12%

15%

S&P 500 ex-energy

Energy sector

10.9%

10%

Positive for profits

10%

8%

8.9%

6%
5%

4%
2%

0%

0%
-2%

-5%

-4%
-6%

-10%

-8%

-12%

Negative for profits

2016

2014

2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

-20%

-10.9%
Dec-2010
Mar-2011
Jun-2011
Sep-2011
Dec-2011
Mar-2012
Jun-2012
Sep-2012
Dec-2012
Mar-2013
Jun-2013
Sep-2013
Dec-2013
Mar-2014
Jun-2014
Sep-2014
Dec-2014
Mar-2015
Jun-2015
Sep-2015
Dec-2015

-10%

-15%

LEFT: Productivity is measured by a proprietary proxy of U.S. economic productivity that tracks cyclical corporate productivity. Shaded bars indicate
recessions. Source: Haver Analytics, Fidelity Investments (AART), as of 2/29/16. RIGHT: Source: Standard & Poors, FactSet, Fidelity Investments
(AART), as of 12/31/15.

11

Entering 2016, gold was in a four-year slump as investors chased higher returns amid relatively calm markets. But when
volatility surged in Q1, investors rushed to gold in a flight to safety, and its price jumped 17%. Gold prices are also driven by
macro and supply/demand factors. For instance, real interest rates below 3% have historically been supportive of gold prices.

After Extended Slump, Gold Prices

Rising Amid Volatility

Gold Prices Historically Increase

When Rates Are Low

Historical Price of Gold 19652016

Real Interest Rates and Gold Price Performance 19712016

$2,000

Avg. YoY % Change in Gold Price

$1,800

50%

$1,600

40%

$1,400

30%

17% increase
in gold prices
in Q1 2016

$1,200
$1,000

42.6%
39.4%

20.8%
20%
10%

$800

20.9%
16.5% 17.4%

7.3%

10.5%
1.7%

3.9%

0%

$600
$400

-10%

$200

-20%
2016

2014

2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

$0

Current real
Interest rate: 0.59%

5.3%
12.1%

-4 to -3 to -2 to -1 to 0 to - 0 to 1 to 2 to 3 to 4 to 5 to 6+%
-5% -4% -3% -2% -1% 1% 2% 3% 4% 5% 6%
Real Interest Rates

Past performance is no guarantee of future results. LEFT: Source: Bloomberg Finance L.P., as of 3/31/2016. RIGHT: Highlighted bar indicates historical
price increase in gold price at current range of real interest rates. For the purpose of this discussion, Real Interest Rate is defined as the current fed
funds rate minus the Consumer Price Index (CPI). Source: Bloomberg Finance L.P., as of 3/31/2016.

12

SECTOR UPDATE

Gold Prices Boosted by Market Volatility, Macro Uncertainty

 SECTOR UPDATE

Gold Miners: Improving Fundamentals, Attractive Valuations

After being squeezed by low gold prices for several years, gold stocks had strong performance in the first quarter. These
companies received a boost from a significant reduction in capital expenditures and from an improved supply/demand
picture. Gold mining stocks also were the cheapest theyve been relative to the price of gold in more than 15 years.

Gold Miners Capital Spending Has

Declined Sharply

Prices for Gold Mining Stocks at

Multiyear Lows

Gold Miners Capital Expenditures (avg. annual, $M)

Gold Stocks/Gold Price Ratio

$25,000

Average Since December 1994

0.70
0.60

$20,000

0.50
$15,000

0.35

0.40
$10,000

0.30
0.20

$5,000

0.10

Mar-16

Mar-14

Mar-12

Mar-10

Mar-08

Mar-06

Mar-04

Mar-02

Mar-00

Mar-98

Mar-96

0.00
Mar-94

Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16

$0

Past performance is no guarantee of future results. LEFT: Includes all publicly traded gold mining companies among the 3,000 largest U.S. stocks.
Source: Haver Analytics, Fidelity Investments, as of 3/31/2016. RIGHT: HUI Index/Gold Price Ratio shows the month-end ratio of the NYSE Arca Gold
BUGS Index (HUI) to the price of gold. BUGS stands for basket of unhedged gold stocks. Source: Bloomberg Finance L.P., as of 3/31/2016.

13

 SECTOR UPDATE

A Less Cyclical Consumer Discretionary Sector?

Before 2000, Consumer Discretionary was dominated by brick-and-mortar companies with heavy fixed assets, which hurt
free cash flow (FCF). But since the e-commerce boom, companies have been able to reduce capital spending and generate
more FCF, which could help sustain margin expansion and make the sector less economically sensitive than it used to be.

Consumer Discretionary Free Cash Flow

Higher than the Markets Since 2000

Higher FCF Growth in the CD Sector

Could Sustain Multiple Expansion

FCF growth differential relative to broad market, by decade

CD sector FCF growth vs. forward PE relative to market

200.0%

82.9%

Fwd PE Relative to Market

56.5%
8.3%

0.0%

-29.6%

180.0%

16.0%

160.0%

14.0%

140.0%

-100.0%

120.0%

-126.5%

100.0%
80.0%

-300.0%

-389.4%

-500.0%
Late 60s

70s

80s

90s

12.0%
10.0%
8.0%

-200.0%

-400.0%

FCF Growth Relative to Market

00s

2011 to
2015

6.0%
4.0%

60.0%

2.0%

40.0%

0.0%

Oct-1982
Oct-1984
Oct-1986
Oct-1988
Oct-1990
Oct-1992
Oct-1994
Oct-1996
Oct-1998
Oct-2000
Oct-2002
Oct-2004
Oct-2006
Oct-2008
Oct-2010
Oct-2012
Oct-2014
Mar-2016

100.0%

Relative free cash flow is the differential in growth rates. To illustrate, FCF generation in the broad market grew by 511% in the 1970s, but only by 122%
in the Consumer Discretionary sector. Relative FCF is calculated as the differential, hence the -389% difference in FCF. The forward price-to-earnings
(PE) ratio is a current stock's price over its "predicted" earnings per share. Broad market defined as the 3,000 largest U.S. stocks. Past performance is
no guarantee of future results. Source: Haver Analytics, Fidelity Investments, as of 3/31/2016.

14

Glossary and Methodology

Glossary
Bear Market
At least a 20% correction in the stock market.
Cycle Hit Rate
Calculates the frequency of a sector outperforming the
broader equity market over each business cycle phase
since 1962.
Dividend Yield
Annual dividends per share divided by share price.
Earnings before Interest, Taxes, Depreciation, and
Amortization (EBITDA)
A non-GAAP measure often used to compare profitability
between companies and industries, because it eliminates
the effects of financing and accounting decisions.
Earnings per Share Growth
Measures the growth in reported earnings per share over
the specified past time period.
Earnings Yield
Earnings per share divided by share price. It is the inverse
of the price-to-earnings (P/E) ratio.
Free Cash Flow (FCF)
The amount of cash a company has remaining after
expenses, debt service, capital expenditures, and
dividends. High free cash flow typically suggests stronger
company value.
Free-Cash-Flow Yield
Free cash flow per share divided by share price. A high
FCF yield often represents a good investment opportunity,
because investors would be paying a reasonable price for
healthy cash earnings.
Full-Phase Average Performance
Calculates the (geometric) average performance of a
sector in a particular phase of the business cycle and
subtracts the performance of the broader equity market.
Idiosyncratic Risk
Risk that is specific to an individual investment and shows
little or no correlation to overall market risk.

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 companys 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 mos.
Price-to-Sales (P/S) Ratio
The ratio of a companys current share price to reported
sales.
Relative Strength
The comparison of a securitys performance relative to a
benchmark, typically a market index.
Return on Equity
The amount, expressed as a percentage, earned on a
companys common stock investment for a given period.
Risk Decomposition
A mathematical analysis that estimates the relative
contribution of various sources of volatility.
Standard Deviation
Shows how much variation there is from the average
(mean or expected value). A low standard deviation
indicates that the data points tend to be very close to the
mean, whereas a high standard deviation indicates that the
data points are spread out over a large range of values. A
higher standard deviation represents greater relative risk.

Methodology
Business Cycle
The business cycle as used herein reflects fluctuation of
activity in the U.S. economy and is based on Fidelitys
analysis of historical trends.
Fundamentals
Sector rankings are based on equally weighting the
following four fundamental factors: EBITDA growth,
earnings growth, return on equity (ROE), and free-cashflow margin. However, we evaluate the Financials sector
only on earnings growth and ROE because of differences
in its business model and accounting standards.

Momentum
Compares the price change of a sector versus itself over a
12-month period, with a one-month reversal on the latest
month. Persistence in returns can be a useful indicator of
sector performance during a six- to 12-month period.
Relative Strength
Compares the strength of a sector versus the S&P 500
Index over a six-month period, with a one-month reversal
on the latest month; identifying relative strength patterns
can be a useful indicator for short-term sector performance.
Relative Valuations
Valuation metrics for each sector are relative to the S&P
500 Index. Ratios compute the current relative valuation
divided by the 10-year historical average relative 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: 20%; P/S: 20%; free-cash-flow yield: 20%; dividend
yield: 5%. However, the Financials sector is weighted as
follows: P/E: 59%; P/B: 33%; dividend yield: 8%.

Primary Contributors
Asset Allocation Research Team (AART)
AART is part of the Global Asset Allocation division of
Fidelitys Asset Management organization. AART conducts
economic, fundamental, and quantitative research to
develop asset allocation recommendations for Fidelitys
portfolio managers and investment teams.
Fidelity Management & Research Company Equity
Division
The Equity Division within 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
fundamental research.
Fidelity SelectCo
SelectCo is a division within Fidelitys Asset Management
organization and is focused exclusively on expanding the
companys 30-year heritage of sector investing to help
meet the evolving needs of investors and advisers for
innovative sector-specific tools, resources, and products.

15

Appendix
Information presented herein is for discussion and illustrative purposes only and is not a
recommendation or an offer or solicitation to buy or sell any securities. Views expressed
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
provided are those of the authors and not necessarily those of Fidelity Investments or its
affiliates. Fidelity does not assume any duty to update any of the information.
References to specific investment themes are for illustrative purposes only and should
not be construed as recommendations or investment advice. Investment decisions
should be based on an individuals own goals, time horizon, and tolerance for risk.
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
may differ from those assumed. There can be no assurance that forward-looking
statements will materialize or that actual returns or results will not be materially different
from those described here.
Past performance is no guarantee of future results.
Investing involves risk, including risk of loss.
All indices are unmanaged. You cannot invest directly in an index. Index or benchmark
performance presented in this document does not reflect the deduction of advisory fees,
transaction charges, and other expenses, which would reduce performance.
Stock markets are volatile and can decline significantly in response to adverse issuer,
political, regulatory, market, or economic developments.
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.
Business Cycle Definition
The typical Business Cycle depicts the general pattern of economic cycles throughout
history, though each cycle is different. In general, the typical business cycle
demonstrates the following:
Early-cycle: economy bottoms and picks up steam until it exits recession, then begins
the recovery as activity accelerates. Inflationary pressures are typically low, monetary
policy is accommodative, and the yield curve is steep.
Mid-cycle: economy exits recovery and enters into expansion, characterized by broader
and more self-sustaining economic momentum but a more moderate pace of growth.
Inflationary pressures typically begin to rise, monetary policy becomes tighter, and the
yield curve experiences some flattening.
Late-cycle: economic expansion matures, inflationary pressures continue to rise, and
the yield curve may eventually become flat or inverted. Eventually, the economy
contracts and enters recession, with monetary policy shifting from tightening to easing.

Please note that there is no uniformity of time among phases, nor is the chronological
progression always in this order. For example, business cycles have varied between
one and 10 years in the U.S., and there have been examples when the economy has
skipped a phase or retraced an earlier one.
Market Indices
The S&P 500 Index is a market capitalizationweighted index of 500 common stocks
chosen for market size, liquidity, and industry group representation to represent U.S.
equity performance. S&P 500 is a registered service mark of Standard & Poors
Financial Services LLC. Sectors and industries are defined by the Global Industry
Classification Standard (GICS).
The S&P 500 sector indices include the standard GICS sectors that make up the S&P
500 Index. The market capitalization of all S&P 500 sector indices together composes
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.
MSCI USA Investable Market Index (IMI) is designed to measure the performance of the
large-, mid-, and small-cap segments of the U.S. market. With 2,505 constituents, the
index covers approximately 99% of the free-float-adjusted market cap in the U.S.
The Russell 3000 Index measures the performance of the largest 3,000 U.S.
companies, representing approximately 98% of the investable U.S. equity market.
Sectors are defined as follows: Consumer Discretionary: companies that provide
goods and services that people want but dont necessarily need, such as televisions,
cars, and sporting goods; these businesses tend to be the most sensitive to economic
cycles. Consumer Staples: companies that provide goods and services that people use
on a daily basis, like food, household products, and personal-care products; these
businesses tend to be less sensitive to economic cycles. Energy: companies whose
businesses are dominated by either of the following activities: the construction or
provision of oil rigs, drilling equipment, or other energy-related services and equipment,
including seismic data collection; or the exploration, production, marketing, refining,
and/or transportation of oil and gas products, coal, and consumable fuels. Financials:
companies involved in activities such as banking, consumer finance, investment banking
and brokerage, asset management, insurance and investments, and real estate,
including REITs. Health Care: companies in two main industry groups: health care
equipment suppliers and 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. Technology: companies in technology
software and services and technology hardware and equipment. Materials: companies
that are engaged in a wide range of commodity-related manufacturing.
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.

16

Appendix
Third-party marks are the property of their respective owners; all other marks are the
property of FMR LLC.
If receiving this piece through your relationship with Fidelity Institutional Asset
ManagementSM (FIAM), this publication is provided by Fidelity Investments Institutional
Services Company, Inc..
If receiving this piece through your relationship with Fidelity Personal & Workplace
Investing (PWI) or Fidelity Family Office Services (FFOS) this publication is provided
through Fidelity Brokerage Services LLC, Member NYSE, SIPC.

If receiving this piece through your relationship with Fidelity Clearing and Custody
Solutions or Fidelity Capital Markets, this publication is for institutional investor or
investment professional use only. Clearing, custody or other brokerage services are
provided through National Financial Services LLC or Fidelity Brokerage Services LLC,
Member NYSE, SIPC.
755121.4.0
2016 FMR LLC. All rights reserved.

17