Fidelity analysts back consumer and tech sectors as utilities, industrials and energy lose their appeal

Chris Papadopoullos
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Sentiment on the consumer goods sector has gone up (Source: Getty)

The consumer and tech sectors will drive corporate earnings growth this year, a survey of analysts at an investment giant revealed today.

However, the survey of 200 analysts at Fidelity International reveals they have dramatically toned down their outlook on utilities, industrials and financial companies for this year.

Subdued inflation, rising house prices, wage growth and falling unemployment have boosted investor sentiment toward firms consumer goods.

Fidelity’s sentiment score for the non-essential consumer goods sector rose to 5.3 for 2016 from five last year. Sentiment on the consumer staples sector edged down slightly but maintained a high score of 5.8. IT occupied the top spot with a score of 6.2.

Other sectors are expected to struggle. Financial sector sentiment dipped to 5.2 from 6.4 while utilities dropped to 3.9 from 5.6. Industrials declined to 4.8 from 6.4. Overall investor sentiment is down slightly from last year.

Risks have increased due to uncertainty coming from emerging markets and geopolitics.

Analysts are also more cautious on Europe and the US, where they believe company fundamentals will remain comparable to last year’s tough conditions.

“As large swathes of the economy – energy, materials, industrials and utilities – are buffeted by low commodity prices and a global decline in capital expenditure, it may take years of capital scarcity to restore the capital and cost discipline necessary to bring equilibrium to supply and demand,” said Michael Sayers, director of research at Fidelity International.

“While this is going on, it is crucial that the service side of the economy holds up if a global recession is to be avoided later in the year. Our survey’s findings offer encouragement in this area.”

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