A handful of sectors are shining through the pandemic, while others are struggling badly. Through 3Q, six of 11 GICS sectors had positive performances for the year-to-date, and the S&P 500 was up 2%. The leading sectors included Technology (up 29%) and Consumer Discretionary (+23%). The badly lagging sectors include Real Estate (-10%), Financials (-21%) and Energy (-41%). On a three-year basis, two clear trends emerge: the Tech sector has outperformed three years in a row, while the Energy sector has lagged badly three years in a row. Will the trends reverse next year? We doubt it. Investors are eager to allocate capital to innovative IT companies that are connecting people (even as they are practicing social distancing) and making corporations more efficient. Meantime, the Energy sector is facing “peak demand” forecasts at some point in the next 2-3 decades, suggesting that the long-term growth outlook is capped. In addition to Technology, the other sectors we favor for “secular” long-term EPS growth include Healthcare (which is on the front lines fighting Covid-19) and Financial Services.
Subscribe to Yahoo Finance Premium for full access
Read the latest independent research including analyst forecasts, ratings on the US economy, and more. Get individual company and overall sector level recommendations.
Try Premium FREE