Daily Spotlight: Sector Leaders & Laggards in 2025

Summary

The AI trade showed some cracks in the foundation during the fourth quarter of 2025, mostly related to Nvidia’s 4Q EPS. The S&P 500 edged up only 0.1% in November before declining 0.1% in December on an index price basis. But that does not mean nothing happened in the market during those two months. AI winnings were redeployed into other sectors into year-end. Fourth-quarter stock performance at the sector level shows where some of those AI winnings went, while analysis of full-year performance suggests that investors are not giving up on the AI trade altogether. For 4Q25, the best sector performer was Healthcare, which rose 10.9%. The S&P 500, by contrast, rose 2.3% in 4Q25, with all of that strength coming in October. Four other sectors were positive in the quarter: Materials, Information Technology, Financial, and Industrials. Utilities, which was strong for most of the year, declined after Fed commentary signaled the potential for fewer rate cuts ahead, at least until Powell steps down. Other sectors that were down in the quarter included Real Estate, Consumer Staples, Communication Services, and Consumer Discretionary, while Energy was unchanged. Redeployment of AI winnings during 4Q25 had the effect of smoothing the overall sector map for full-year 2025. For the year, all sectors were positive. Sectors