View from the Observation Deck

We update today’s table on a regular basis to provide insight into the variability of sector performance by market capitalization. The table above presents the total returns of three major U.S. equity indices and their sectors over two distinct time frames: the 2024 calendar year, and year-to-date (YTD) through 5/13/25. 

• The S&P 500 Index (“Index”) stood at 5,886.55 on 5/13/25, representing a price-only return of 18.14% from its most recent low (4,982.77 on 4/8/25). That said, the Index remains 4.19% below its all-time high, which was set on 2/19/25. For comparison, the S&P MidCap 400 and S&P SmallCap 600 Indices stood 9.75% and 14.70% below their respective all-time highs as of the same date.
  
  
• Large-cap stocks, as represented by the S&P 500 Index, posted total returns of 25.00% in 2024, outperforming the S&P MidCap 400 and S&P SmallCap 600 indices, with total returns of 13.89% and 8.64%, respectively, over the period (see table).
  
  
• Sector performance can vary widely by market cap and have a significant impact on overall index returns. Communication Services and Information Technology were two of the more extreme cases last year. This year, Energy and Consumer Staples exhibit the largest performance difference between market capitalizations.
  
  
• Industrials and Financials were the two top-performing sectors in the S&P 500 Index YTD. By comparison, those sectors returned just 0.66% and 0.54%, respectively, in the S&P MidCap 400 Index and -3.50% and -0.27%, respectively, in the S&P SmallCap 600 Index over the period. 

Takeaway: As revealed in today’s table, mid-cap and small-cap stocks have trailed their large-cap counterparts so far this year. At the sector level, large-cap stocks outperformed their small and mid-sized peers in nine of the eleven sectors presented today, with consumer discretionary and utility companies acting as the only outliers. This was not the case last year. In 2024, large-cap stocks outperformed their peers in just five of the eleven sectors. As we see it, heightened volatility from the threat of tariffs, eroding economic conditions, and increasing geopolitical tensions may have pushed investors into less risky assets. That said, the near-term prospects for equities are likely to increase as trade agreements are announced, in our opinion. We continue to suggest that investors watch adjustments to year-end earnings estimates closely. Data from FacSet revealed that 2025 calendar-year earnings for the S&P MidCap 400 and S&P SmallCap 600 Indices are estimated to total 183.30 and 82.95, respectively, as of 5/13/25, down from 198.17 and 92.04 on 12/31/24. For comparison, the S&P 500 Index’s 2025 calendar-year earnings were estimated to total 265.38 on 5/13/25, down from 274.12 on 12/31/24.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P SmallCap 600 Index is a capitalization-weighted index that tracks U.S. stocks with a small market capitalization. The S&P 500 Equal Weighted Index is the equal-weight version of the S&P 500 Index. The 11 major sector indices are capitalization-weighted and comprised of S&P 500, S&P MidCap 400 and S&P SmallCap 600 constituents representing a specific sector.

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View from the Observation Deck

In a post from December 2024 (click here) we noted that interest rate policy expectations had set off a rally in small and mid-cap stocks, sending them soaring when compared to their large-cap peers. Given recent economic deterioration and increasingly disruptive tariff turmoil, we thought an update to our previous post would be timely. The chart above includes the price-only returns of the specified indices from 7/9/24 to 5/9/25, normalized to a factor of 100. As a refresher, we chose 7/9/24 as our starting point as it was the day Jerome Powell testified that the U.S. economy was no longer overheated, implying that looser monetary policy could be forthcoming.

For reference, the total returns for the five indices in today’s chart were as follows (7/9/24 – 5/9/24):

S&P 500 Equal Weighted Index: 6.86%
S&P MidCap 400 Index: 3.24%
S&P 500 Index: 2.57%
S&P SmallCap 600 Index: -0.01%
Bloomberg Magnificent 7 Index: -1.76%

Total returns for each of these indices are significantly lower than where they stood in our last post. From our perspective, the potential for a trade war and deteriorating U.S. economic data were the most likely catalysts for declining equity prices between publications. Notably, the S&P 500 Equal Weight Index was the top performer from 7/9/24 - 5/9/25, indicating investor’s continued desire to broaden their equity holdings.

Valuations for the S&P 500 Equal Weight, S&P SmallCap 600, and S&P MidCap 400 Indices remain more attractive than those of the Blomberg Magnificent 7 and broader S&P 500 Indices.

As of 5/13/25, the price-to-earnings ratios for each of the indices in today’s chart were as follows: Bloomberg Magnificent 7 Index (33.54); S&P 500 Index (23.70); S&P 500 Equal Weighted Index (18.20); S&P MidCap 400 Index (17.09); and S&P SmallCap 600 Index (15.84).

Takeaway: With a total return of 6.86%, the S&P 500 Equal Weighted Index was the top performer over the period in today’s chart. The S&P SmallCap 600 Index sits near the bottom, with a total return of -0.01%, down from a gain of 18.00% in our last post. As we see it, lackluster economic data and the threat of a trade war explain the stark change in small cap performance since December. Earnings expectations have suffered as well. As of 5/12/25, earnings for the S&P Small Cap 600 Index were estimated to increase by 5.44% year-over-year (y-o-y) in 2025, down from 17.49% y-o-y in our last post on this topic. For comparison, the 2025 earnings growth estimates for the remaining indices were as follows: Bloomberg Magnificent 7 Index (30.83%); S&P 500 Index (11.64%); S&P 500 Equal Weighted Index (5.43%); and S&P MidCap 400 Index (2.20%). As always, these are estimates and are subject to constant revision. As investors charge toward the second half of the year, we trust they will be asking: “what investments are worth the weight they’ve been assigned in my portfolio?” and adjusting accordingly.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P 500 Equal Weighted Index is the equal-weight version of the S&P 500 Index. The Bloomberg Magnificent 7 Price Return Index is an equal-dollar weighted equity benchmark consisting of a fixed basket of 7 widely-traded companies in the U.S. The S&P MidCap 400 Index is a capitalization-weighted index which measures the performance of the mid-range sector of the U.S. stock market. The S&P SmallCap 600 Index is an unmanaged index of 600 companies used to measure small-cap U.S. stock market performance.

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View from the Observation Deck
Investors directing capital into U.S. mutual funds and exchange traded funds (ETFs) favored passive investing versus active management over the 12-month period ended 3/31/25.

Passive mutual funds and ETFs reported estimated net inflows totaling $882.2 billion for the 12-month period ended 3/31/25, while active funds reported estimated net outflows totaling $193.8 billion over the same period. The top three active categories by trailing 12-month net inflows were: Taxable Bonds ($206.4 billion), Nontraditional Equity ($56.9 billion), and Municipal Bonds ($35.6 billion). For comparison, the top three passive categories were U.S. Equity ($480.6 billion), Taxable Bond ($252.8 billion), and International Equity ($80.7 billion).

Equity mutual funds and ETFs saw much lower inflows than their fixed income counterparts over the trailing 12-month period ended 3/31/25.

Combined, the active and passive equity categories experienced inflows of $109.8 billion over the trailing 12-months (not in table). For comparison, the active and passive Taxable and Municipal Bond categories reported net inflows totaling $506.3 billion over the same time frame. The S&P 500, S&P MidCap 400, and S&P SmallCap 600 Indices posted total returns of 8.23%, -2.73%, and -3.43%, respectively, over the 12-months ended 3/31/25, according to data from Bloomberg. With respect to foreign equities, the MSCI Emerging Net Total Return and MSCI Daily Total Return Net World (ex U.S.) Indices posted total returns of 8.39% and 5.41%, respectively, over the same time frame. For comparison, the Bloomberg Municipal Long Bond, Bloomberg U.S. Aggregate, and Bloomberg Global-Aggregate Bond Indices saw total returns of 0.67%, 4.88%, and 3.04%, respectively, over the period.

Takeaway: Passive mutual funds and ETFs saw inflows of $882.2 billion compared to outflows of $193.8 billion for active funds over the trailing 12-month period ended 3/31/25. U.S. Equities experienced the largest disparity, with active shedding $314.6 billion compared to inflows of $480.6 billion for passive funds. Fixed income ETFs saw significantly higher inflows than their equity counterparts. As we see it, deteriorating economic conditions and continued tariff disruption explains this behavior. Net inflows into active and passive equity ETFs totaled just $109.8 billion over the past 12-months, whereas fixed income saw combined net inflows of $506.3 billion over the same time frame.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P SmallCap 600 Index is a capitalization-weighted index that tracks U.S. companies with a small market capitalization. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI World (ex U.S.) Index is a free-float weighted index designed to measure the equity market performance of developed markets. The Bloomberg Municipal Long Bond Index cover the USD-denominated long-term tax exempt bond market, including local general obligation, revenue, insured, and prefunded bonds. The Bloomberg U.S. Aggregate Bond Index measures the investment grade, U.S. dollar-denominated, fixed rate taxable bond market. The Bloomberg Global Aggregate Bond Index measures global investment grade debt in local currency markets. 

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View from the Observation Deck
We are often asked what our favorite sectors are. Sometimes the answer is more evident than at other times, and often it only makes sense via hindsight. Today’s blog post is one that we update each quarter to lend context to our responses. While the above chart does not contain yearly data, only two sectors in the S&P 500 Index (“Index”) have been the top-performer in back-to-back calendar years since 2005. Information Technology was the first, posting the highest total return in 2019 (+50.29%) and 2020 (43.89%). Energy was the second, posting the highest total return in 2021 (54.39%) and 2022 (65.43%), according to data from Bloomberg.

• The top-performing sectors and their total returns in Q1’25 were as follows: Energy (10.21%), Health Care (6.54%), and Consumer Staples (5.23%). The total return for the Index was -4.28% over the period. The other eight sectors generated total returns ranging from 4.94% (Utilities) to -13.80% (Consumer Discretionary).
  
  
• By comparison, the total returns of the top performing sectors in the first quarter of last year were as follows (not in chart): Communication Services (15.82%), Energy (13.69%), and Information Technology (12.69%). The worst-performing sectors for the period were: Consumer Discretionary (4.98%), Utilities (4.57%), and Real Estate (-0.55%).
  
  
• For the second consecutive quarter, not a single sector remained in the top three from quarter to quarter. 
  
  
• Sector rotation can occur rapidly. Case-in-point, the S&P 500 Communication Services and Information Technology Indices, the two top performing sectors in the broader Index last year, saw total returns of -6.21% and -12.65%, respectively, during Q1’25.
  
  
• Click here to access our post featuring the top-performing sectors in Q2’23, Q3'23, Q4'23 and Q1’24.

Takeaway: As we observe from today’s chart, the top-performing sector often varies from quarter to quarter. The first quarter of 2025 kept that trend intact, with the S&P 500 Energy, Health Care, and Consumer Staples Indices emerging as the top performers. Notably absent from today’s list are the Communication Services and Information Technology sectors, which were the top performing sectors in 2024. From our perspective, tariffs and diminishing economic data explain much of the recent weakness in these sectors. Additionally, there is mounting concern regarding Artificial Intelligence’s near-term profitability, which has added pricing pressure to the companies in those sectors. Of the eleven sectors that make up the Index, the Financials and Utilities Indices boast the highest total returns on a trailing 12-month basis (thru 5/5), at 23.68% and 19.86%, respectively. Will a different sector rise to the top in the first quarter of 2025? We look forward to seeing what the data reveals.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The respective S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.  

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View from the Observation Deck

The old axiom in the stock market about selling your stocks at the close of April and buying them back at the start of November used to make some sense from a seasonality standpoint. Back when the U.S. was more of an industrialized economy, it was common for plants and factories to close for a month or longer in the summer. This downtime allowed businesses to retool and gave employees time to vacation. The “Sell In May” theory was that companies would conduct less commerce in that six-month span, which would likely translate into lower earnings, and temporarily reduced stock prices. In our view, the U.S. economy has become so technologically advanced and globally competitive that companies can no longer afford these extended periods of stagnation.

• From 2004 through 2024, there were just three instances (2008, 2011 & 2022) in which the S&P 500 Index posted a negative total return from May through October.
  
  
• The average total return for the S&P 500 Index for the May-October periods in the table was 3.92%. 
  
  
• Seventeen of the twenty top-performing sectors in the table posted total returns in excess of 10.00% (May-October). For comparative purposes, from December 1926 through December 2024 (99 years), the S&P 500 Index posted an average annual total return of 10.41%, according to Ibbotson & Associates/Morningstar.

Takeaway: We publish today’s table on an annual basis as a reminder to investors that not all market maxims should be taken at face value. In this case, the data presented does not support the notion that investors should “sell in May and go away”. Over the last 20 years, an investor who remained fully invested in the S&P 500 Index from May through October enjoyed an average annual total return of 3.92% during those months alone, a significant figure when compounded. We continue to advocate that investors consider their time horizons and take risk as appropriate.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance, while the 11 major S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 companies representing a specific sector.

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View from the Observation Deck

Today's blog post is for those investors who want to drill down below the sector level to see what is not performing well in the stock market this year. The S&P 500 Index (“Index”) was comprised of 11 sectors and 127 subsectors as of 3/31/25, according to S&P Dow Jones Indices. The 15 worst-performing subsectors in today’s chart posted total returns ranging from -11.05% (Life Sciences Tools & Services) to -31.25% (Automobile Manufacturers) over the period. Click here to view our last post on this topic.

• As indicated in the chart above, the S&P 500 Consumer Discretionary Index accounts for seven of the 15 worst-performing subsectors year-to-date (YTD) through 4/1, followed by Industrials (3) and Real Estate (2). Automobile Manufacturers, a subsector of the Consumer Discretionary sector was the worst performer, posting a total return of -31.25% for the period.
  
  
• Just three of the 11 sectors that comprise the Index posted negative total returns YTD. Consumer Discretionary was the worst performer, with a total return of -12.83% during the period. The broader S&P 500 Index posted a total return of -3.91% over the time frame.
  
  
• Semiconductors and Data Center REITs, which declined 17.54%, 14.44%, respectively, YTD, are notable additions to today’s chart. For comparison, the Semiconductors subsector increased by 129.46% (total return) over the two-year period ended 4/1/25, while Data Center REITs saw total returns of 28.55% over the same period.
  
  
• As of 3/31/25, the most heavily weighted sector in the S&P 500 Index was Information Technology at 29.63%, according to S&P Dow Jones Indices. For comparison, the Financials and Health Care sectors were the next-largest with weightings of 14.68% and 11.18%, respectively.

Takeaway: Consumer Discretionary stocks are bearing the brunt of this year’s equity market downturn, with seven of the worst-performing subsectors in today’s chart coming from the broader sector. Fears of an economic downturn, persistent inflation, and weakening consumer sentiment likely contributed to waning expectations for these companies. Semiconductors and Data Center REITs are noteworthy additions to today’s post, having declined by 17.54% and 14.44%, respectively, YTD. As many readers will know, capital expenditure among semiconductor companies and data centers skyrocketed as vendors rushed to fulfill demand for AI applications. As we see it, recent losses in these subsectors may reflect concern over future returns, especially given fresh developments from competitors in the space who claim disruptive efficiency gains. As always, there are no guarantees, but there could be some potential deep value opportunities in this group of subsectors. For those investors who have interest, there are a growing number of packaged products, such as exchange-traded funds, that feature S&P 500 Index subsectors.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance, while the S&P sector and subsector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector or industry. 

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The blog will resume on May 1st.

View from the Observation Deck

Today's blog post is for those investors who want to drill down below the sector level to see what is performing well in the stock market. The S&P 500 Index was comprised of 11 sectors and 127 subsectors on 3/28/25, according to S&P Dow Jones Indices. The 15 top-performing subsectors in the chart posted total returns ranging from 30.48% (Gold) to 15.62% (Insurance Brokers). Click here to view our last post on this topic.

• As indicated in the chart above, the Communication Services and Financials sectors were tied for most top-performing subsectors (3) on a year-to-date (YTD) basis. Semiconductors, which are part of the S&P 500 Information Technology Index, are notably absent from today’s chart. Semiconductors were among the top-performing subsectors in each of our last seven posts on this topic (dating back to 3/21/2023).
  
  
• With respect to the 11 major sectors that comprise the S&P 500 Index, Energy posted the highest total return for the period captured in the chart, increasing by 10.21%. The second and third-best performers were Health Care and Consumer Staples, with total returns of 6.54% and 5.23%, respectively. The S&P 500 Index posted a total return of -4.28% over the period.
  
  
• As of 3/28/25, the most heavily weighted sector in the S&P 500 Index was Information Technology at 29.78%, according to S&P Dow Jones Indices. For comparison, Financials and Health Care were the next-largest sectors with weightings of 14.58% and 11.14%, respectively.
  
  
• Using 2025 consensus earnings estimates, the Information Technology and Energy sectors had the highest and lowest price-to-earnings (P/E) ratios at 31.14 and 15.98, respectively, as of 3/31/25 (excluding Real Estate). For comparison, the S&P 500 Index had a P/E ratio of 22.64 as of the same date.

Takeaway: With a total return of 10.21%, the S&P 500 Energy Index is the top-performing S&P 500 Index sector YTD. Despite this feat, not a single Energy subsector made its way into today’s chart, suggesting the sector’s gains have been well-distributed across its five subsectors. We wrote about energy in a post on 3/20 (click here), suggesting that burgeoning demand for natural gas and U.S. crude oil were unlikely to weaken in the near-term. The Gold subsector sits at the top of today’s chart, propelled upward by record highs in the price of its underlying metal. The price of one troy ounce of gold stood at a record $3,123.57 on 3/31/25. As we see it, persistently high inflation and a worsening U.S. economic outlook may explain gold’s 19.02% price increase YTD. The Information Technology Index is notably absent from today’s chart, marking the first time the sector has been missing from this post in over two years.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance, while the S&P sector and subsector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector or industry.

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View from the Observation Deck

While many have predicted that petroleum usage will decline over the long-term, global oil demand remains resilient, increasing by 1.9% and 0.8% in 2023 and 2024, respectively, according to the International Energy Agency (IEA). That said, the IEA reported that oil accounted for less than 30% of total energy demand for the first time ever in 2024, suggesting a potential long-term shift in global energy supply may be underway. Today’s post contrasts the price per barrel for West Texas Intermediate (WTI) crude oil to U.S. crude oil production, measured in thousands of barrels per day (b/d), on a weekly basis. We begin the chart on 3/4/22, several days before oil’s most recent peak which occurred on 3/8/22.

• The price of WTI crude oil stood at $68.28 per barrel at the close of trading on 3/21/25 (end of chart), down 40.98% from its closing price of $115.68 on 3/4/22 (start of chart), according to data from Bloomberg.
• The average daily price of crude oil was $81.44 per barrel during the period captured in the chart. The highest and lowest daily closing prices were $123.70 and $65.75 per barrel on 3/8/22 and 9/10/24, respectively.
• For comparative purposes, the S&P 500 Energy and S&P 500 Indices posted average annual total returns of 10.93% and 10.92%, respectively over the same time frame. The top-performing energy subsector, of which there are five, was the S&P 500 Oil & Gas Storage & Transportation subsector, with an average annual total return of 25.28%.
• U.S. oil production surged from 11.6 million b/d on 3/4/22 to 13.6 million b/d as of 3/21/25, according to data from the U.S. Department of Energy.

Takeaway: On 3/21/25, the price per barrel of WTI crude oil stood at $68.28, 44.80% below its most recent high of $123.70 which occurred on 3/8/22, just after Russia’s invasion of Ukraine. As we see it, several factors account for oil’s precipitous price decline. First, there is the fundamental issue of supply. Supply constraints, including sanctions against oil from Iran and Venezuela as well as production cuts by members of OPEC+ and its allies, were largely offset by U.S. production, which surged to a record 13.2 million b/d, on average, in 2024. Notably, OPEC+ announced it will increase its supply in April of this year, potentially adding 2.2 million b/d to global production by September 2026. As a result, the IEA forecasts global oil supply will total 104.7 million b/d in 2025, up from 103.5 million b/d in December 2024. Second, oil consumption and economic progress exhibit a strong positive correlation. In January 2025, the IMF forecast that global growth will total 3.3% in 2025 and 2026, well short of the historical average of 3.7%. Declining oil prices may reflect these deteriorating economic expectations. Stay tuned!

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P 500 Energy Index is a capitalization-weighted index comprised of 500 stocks representing the energy sector. The S&P 500 Energy Index is comprised of five subsectors.

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View from the Observation Deck

Today's blog post highlights the disparities that often exist between the equity returns posted by mining companies and the spot price performance of physical gold and silver. Since precious metals tend to be priced in U.S. dollars, we also included a column that tracks the relative strength of the U.S. dollar against a basket of other major currencies.

• Precious metals have historically been considered potential inflation hedges by investors. From 1926-2024, the 12-month rate of change on the Consumer Price Index (CPI) averaged 3.0%, according to data from the Bureau of Labor Statistics. It stood at 2.8% at the end of February 2025, down from its most-recent high of 9.1% set in June 2022.
  
  
• The price of gold has been surging, setting multiple record highs. The spot price of one ounce of gold stood at a record $3,047.79 on 3/19/25, up 41.26% year-over-year.
  
  
• The spot price of silver has also grown by a considerable amount, increasing 14.29% in 2025 alone (thru 3/21). That said, unlike gold, the spot price of silver has not recovered to its all-time high. The price of one ounce of silver stood at $33.03 on 3/21/25, below its all-time high of $49.45 set on 1/18/80.
  
  
• The spot price of the U.S. Dollar Index declined by 4.05% YTD through 3/21. 
  
  
• From 2010 through 2024, the Philadelphia Stock Exchange Gold & Silver Index posted a positive total return in seven of the 15 calendar years. Six of them occurred from 2016 through 2024. It is solidly in positive territory YTD (see table).

Takeaway: In our last post on this topic (click here), we wrote that we expected the value of safe haven assets to continue increasing in the face of elevated geopolitical turmoil, economic deterioration, and stubbornly high inflation. Our view remains unchanged in that regard. Additionally, the recent devaluation of the U.S. dollar (-4.05% YTD thru 3/21) could stoke further demand for these metals. Demand for gold has been seemingly insatiable. The World Gold Council reported that global demand for gold stood at a record 4,975 tons in 2024. Of that total, 1,180 tons were held for investment purposes, up 25% year-over-year. Retail gold consumption generally accounts for a significant portion of global demand. That said, demand remains elevated among the world’s central banks, which purchased 1,045 tons of the metal in 2024. The figure marks the third year in a row where central banks purchased greater than 1,000 tons of gold. We expect the recent surge in the value of safe haven assets may continue if global risks to stability persist.

The chart and performance data referenced are for illustrative purposes only and not indicative of any actual investment. The index performance data excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. There can be no assurance that any of the projections cited will occur. The Philadelphia Stock Exchange Gold & Silver Index is a capitalization-weighted index comprised of the leading companies involved in the mining of gold and silver. The U.S. Dollar Index (DXY) indicates the general international value of the dollar relative to a basket of major world currencies. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

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View from the Observation Deck

Today's blog post compares the performance of energy-related stocks to the broader market, as measured by the S&P 500 Index, over an extended period. Given global dependence on oil, natural gas, and electricity, the prices of companies in those industries are subject to a myriad of influences. Click here to view our last post on this topic.

The U.S. Energy Information Administration (EIA) estimates that U.S. electricity consumption will total a record 4,215 billion kilowatt hours (kWh) in 2025, up from the previous record of 4,097 billion kWh in 2024. 

Electricity demand is surging as resource-intensive workloads such as training AI models, electric vehicle charging, and electric appliances are introduced into more U.S. homes. As we see it, the disparity in trailing 12-month returns for energy companies (2.80%) compared to Utilities (27.51%) reflects this phenomenon. That said, the EIA estimates that natural gas will account for 40% of total U.S. power generation in 2025, requiring increased inventories and production. Colder than expected weather in January and February resulted in declining natural gas inventories. The EIA forecasts inventories will fall to less than 1.7 trillion cubic feet in March, 10% below the 5-year average for the metric. As a result, natural gas prices continued to surge, increasing by an astonishing 137.93% over the trailing 12-month period ended 3/18/25.

Year-to-date (YTD), the Energy Index has outperformed the Utilities Index by 278 basis points (see table).

Energy stocks remain among the top-performers YTD despite growing concern that the U.S. economy could fall into a recession. With a total return of 6.74%, the Energy Index is the second-best performing sector in the broader S&P 500 Index YTD thru 3/18/25. The S&P 500 Health Care Index was the only sector to outperform it, increasing by 6.81% over the period. From our perspective, much of this performance has been driven by the emergence of the U.S. as a global leader in energy production. Data from the EIA reveals that the U.S., which accounts for the largest share of worldwide oil production, produced a record 13.2 million barrels of oil per day in 2024. The figure marks the seventh year in a row where the U.S. produced the largest share of global crude oil. Additionally, the U.S. is also the world’s largest exporter of liquefied natural gas (LNG), shipping 4.37 billion cubic feet of LNG throughout the globe in 2024.

Takeaway: The specter of a U.S. recession, growing geopolitical tensions, and potential tariff wars have been unable to quell investors’ appetite for energy stocks in 2025. We expect many will find this data surprising, as the energy sector is typically quite volatile when faced with these headwinds. That said, segments of the energy sector appear to be undergoing foundational shifts which could upend traditional near-term expectations. The emergence of the U.S. as a global leader in crude oil production and LNG exports is a relatively new phenomenon, as is the increase in electricity demanded by AI, electric cars, and electric household appliances. The fact that natural gas is expected to account for 40% of U.S. electricity production this year further solidifies the point. As a capstone, the current administration appears to have taken an energy friendly stance. Utilities, which are often seen as safe havens during market turmoil, could benefit from the recent tailwinds discussed today as well, in our opinion. Will the Energy Index continue to outperform its peers in the Utilities Index this year? We will update this post with new information as warranted.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P 500 Energy Index is a capitalization-weighted index comprised of 21 companies spanning five subsectors in the energy sector. The S&P 500 Utilities Index is a capitalization-weighted index comprised of 29 companies spanning five subsectors in the utilities sector. 

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