Schwab Sector Views: Reflation Creates Opportunities

Have we finally broken through the economic gloom?

During the past couple of months, investors have been cheered by the more stable incoming economic and earnings reports data; in short, the relative stabilization of the financial sector.

The more confident investors are, the more they tend to increase their risk tolerance. Although we're not seeing signs of actual growth yet, we believe that investors are starting to take risks again so that they can benefit from the eventual recovery.

We believe that global reflationary policies, combined with the possibility of a continued weakening of the dollar will benefit the more cyclical technology, industrials and materialssectors.

In contrast, we believe the defensive-oriented consumer staples, telecommunication, andutilities sectors will underperform.

Sectors	Schwab Sector Views	S&P 500 bench- mark weight	Dow Jones Wilshire 5000 bench- mark weight	Date Sector View last changed	Year-to-date return as of06/11/2009
Consumer discretionary	Marketpeform	9%	10%	05/28/2009	12.67
Consumer staples	Underperform	12%	12%	01/23/2009	-1.31
Energy	Marketperform	13%	12%	09/26/2008	6.18
Financials	Marketperform	13%	13%	06/24/2005	-1.00
Health care	Marketperform	14%	14%	04/17/2009	-4.31
Industrials	Outperform	10%	10%	05/28/09	0.73
Information technology	Outperform	18%	18%	12/19/2008	25.96
Materials	Outperform	3%	4%	05/28/2009	23.30
Telecom	Underperform	4%	3%	02/15/2008	-6.30
Utilities	Underperform	4%	4%	05/28/09	-5.10
S&P 500® Index (Large Cap)					5.28