We are reiterating our overweight recommendation to this sector, as we expect investors to increasingly embrace early cyclical industries. Since our last Consumer Discretionary report on April 30, when we upgraded this sector, it has out performed the market, with the bulk of the return coming in last month. Many companies in this sector, particularly within Retail, reported better-than expected second quarter earnings. Investors reacted positively to these earnings and the positive GDP figures and have begun to rotate into this sector. Our view is that the economy will not experience a deep and prolonged downturn, but rather a shallow slowdown that will begin to recover later this year into next year.

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