This is suggesting that the U.S. economy is deleveraging and recovering faster than the rest of the world, ostensibly less encumbered, at least for the moment, by the sovereign debt and banking crises.2

Over time, the performance gap diminishes, despite currency-related gains disappearing over time. Over the past five years, foreign outperformance is evident in four of the 10 sectors.

To help determine the most compelling U.S. sectors going forward, let's identify longer-term trends, reasoning that those U.S. sectors that stood up well over the past one, three and five years probably have something remarkable to offer investors.

Consumer Staples
The most consistent and least-volatile returns were generated by consumer staples. Up 13.61% over the past year, the sector's three- and five-year annualized gains through February 21 were 18.95% and 7.13%, respectively. Companies that manufacture and sell food, beverages and personal products, especially the large caps, have performed well across all markets.

According to Aiden O'Donnell, consumer analyst at Dublin, Ireland-based asset manager Davy, industry leaders such as Coca-Cola, Colgate and Procter & Gamble have keen advantages: branding and pricing power, emerging market access, and attractive dividends that are increasing on a regular basis.

Bob Lee, who manages Fidelity's Select Consumer Staples Portfolio with $1.2 billion in assets, says that these players also benefit from a wide competitive advantage they enjoy when it comes to access to large chain stores and shelf position.

But this sector possesses additional defensive qualities. Lee says that competition from cheap-labor countries has been a non-issue. Disruptive innovation, which challenges industry leadership across many sectors, is also a non-factor in retail. And he has found that even the Internet hasn't significantly altered the status quo.
Over the next six to 12 months, his major concern is that commodity prices will take off. "Last year," he notes, "we saw operating margins contract by 50 to 100 basis points as input prices rose." But Lee expects these costs to remain fairly stable in the near term and that increasing pricing power will push margins higher by up to 50 basis points. 3

Health Care
"The 85% of Americans having some form of health care insurance underpins the sector's inelastic demand," says Morningstar senior mutual fund analyst Christopher Davis. After posting trailing-12-month returns of nearly 12%, sector gains over the past three- and five-year periods were 14.36% and 3.17%, respectively. And despite the uncertainties surrounding ObamaCare, most industry observers think the sector will continue to deliver positive long-term performance.

Led by pharmaceuticals, health care services, medical devices and equipment, and biotech firms, the sector benefits from many of the same advantages enjoyed by consumer staples. Eddie Yoon, who manages Fidelity's Select Health Care Portfolio, with $2.2 billion in assets, explains key performance drivers include steady consumption driven by an aging population, high barriers to entry and increasing global sales-now including emerging markets-that's further entrenching sector leaders. And big pharmas, which make up nearly half the sector, pay dividends ranging from 3.5% to 4.5%.