by
Head of Global Equity Strategy
by
Global Research Analyst

Key takeaways

  • Wells Fargo Investment Institute initiated the new S&P 500 Index Communications Services sector with an unfavorable rating last month.
  • In our view, valuation and quality indicators for this sector are less attractive than those for other large-cap equity sectors at this point in the economic cycle.
  • The earnings revision momentum for the Communications Services sector has deteriorated over the past six months. We anticipate that earnings per share (EPS) forecasts may be downgraded further as this sector faces additional headwinds from new security and regulatory costs.

What it may mean for investors

  • We believe that other S&P 500 Index sectors offer more upside potential in the tactical time frame (6-18 months) than the Communications Services sector does. These sectors include the Health Care sector and sectors that are likely to benefit from continued economic expansion, such as Consumer Discretionary, Financials, and Industrials.

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