View from the Observation Deck

While companies have a number of ways to return capital to shareholders, cash dividends and stock buybacks have become increasingly popular in recent years. Aside from just a few outliers, dividend distributions steadily increased over today’s set of observations. In contrast, share buybacks continue to account for a larger share of total capital disbursements despite greater variance.

• Combined, stock dividends and share buybacks totaled a record $1.57 trillion (preliminary data) in 2024, up from $1.38 trillion in 2023.
  
  
• Dividend distributions increased to a record $167.6 billion in Q4’24, up from $154.1 billion in Q4’23. In total, the companies that comprise the S&P 500 Index (“Index”) distributed a record $629.6 billion in dividend payments in 2024, up from $588.2 billion in 2023.
  
  
• Stock buybacks increased to $243.2 billion in Q4’24 (preliminary data), up from $219.1 billion in Q4’23. Buybacks totaled a record $942.5 billion in 2024, up from $795.2 billion in 2023.
  
  
• In Q4’24, the S&P 500 Index sectors that were most aggressive in repurchasing their stock were as follows (% of all stocks repurchased): Information Technology (26.2%); Financials (17.3%); and Communication Services (12.0%), according to data from S&P Dow Jones Indices.

Takeaway: Investors often view increases in dividend payouts and stock buybacks as signs of financial strength. Total dividend distributions and share repurchases rose to record levels in 2024, signaling improved financial performance among S&P 500 Index constituents. Notably, the top 20 companies accounted for just 49.0% of total buybacks in Q4’24, down from 53.2% in Q3’24. While the figure remains higher than the historical average (47.7%), the metric’s decline may reflect improving financial conditions across a larger share of the Index’s holdings. That said, today’s data is lagged and occurred prior to recent disruption caused by tariffs. The Index’s earnings outlook has weakened in recent months, which could threaten dividend growth and buyback announcements over the near-term. We will update this post with new information as it becomes available.

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 11 major 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
 
Today’s table reveals the trend in global government bond yields over the trailing 12-months ended 5/28/25. As many investors are aware, central banks across the globe began reducing policy rates in 2024 amidst mounting evidence of disinflation. As today’s data shows, this monetary easing resulted in a widespread decline in global government bond yields. That said, concerns that inflation may not be fully contained (among other factors) have increased. In the U.S., the Federal Reserve cited inflation and economic uncertainty as catalysts for leaving policy rates unchanged for the third consecutive meeting in May.
 
Headline inflation remains muted but is forecast to increase in all but three of the countries observed in today’s table by year’s end. 
 
While not presented in the table, inflation remains below central bank targets in all but four of the countries represented above (Germany, Japan, the U.K., and the U.S. are the exceptions). That said, analysts anticipate that inflation will increase across the globe in 2025. Data from Bloomberg reveals that Italy, Japan, and the U.K. are the only countries from today’s table that will not see inflation increase by the end of this year.
 
Since our last post, real yields (yield minus inflation) offered by 10-year government bonds increased across most of the globe.
 
This may seem counterintuitive at first. As shown in the column marked “12-Month Change (Basis Points)”, yields on most of the 10-year government bonds in today’s table declined over the past 12-months. That said, falling yields were largely offset by disinflation. As of 5/28/25, nine of the ten countries represented in today’s table had a positive real yield on their 10-year note (up from eight the last time we posted on this topic). The nine countries and their respective real yields are as follows: France (2.52%); U.S. (2.18%); Australia (1.93%); China (1.80%); Italy (1.63%); Canada (1.54%); U.K. (1.23%); Germany (0.45%); and Switzerland (0.22%).

Takeaway: As we see it, the world’s central banks may find themselves with limited tools to fight recession should global output slow dramatically. As revealed by data from Bloomberg, analysts expect inflation will increase in many of the largest economies across the globe this year. Notably, inflation surged in both Italy and the U.K. in the months since our last post on this topic. That said, 2-year yields declined among all but one country (Japan), indicating that short-term bond investors were discounting for lower interest rates over the 12-month period covered by today’s data. We expect central bank policy rates will remain elevated in countries where inflation has reaccelerated but recognize that these are multifaceted decisions. Should these economies face substantial stagnation, central banks could lower short term rates despite the risks posed by price increases. We will continue to monitor the situation and report back as new developments occur.
 
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

Today’s blog post is intended to provide insight into the movement of bond prices amidst the current investment climate and prevailing interest rate policy. Aside from the most recent data, other dates in the chart are from prior posts we’ve written on this topic. Click here to view our last post in this series.

Seven of the eight bond indices we track suffered price declines since our last post.

Echoing our last post, fixed income securities suffered losses amidst increasingly disruptive tariff policies and economic deterioration. Rate cut expectations reveal the difficulty investors have found in pricing in this data. As of 5/22/25, federal funds rate futures indicated that investors expect just two interest rate cuts through the end of 2025, down from greater than four cuts just weeks prior on 4/30/25.

Prices are increasing at a slower rate.

The pace of U.S. price increases continued to stall in April. Inflation, as measured by the trailing 12-month rate of change in the Consumer Price Index, stood at 2.3% in April 2025, its lowest level since February 2021 when it stood at 1.7%. While this could be viewed as a catalyst to further interest rate cuts, there are other factors at play. In commentary after its most recent meeting, the Federal Reserve (“Fed”) noted that inflation remains above the Fed’s target rate of 2.0% and indicated that a resilient labor market contributed to the Fed’s decision to maintain current interest rates.

Takeaway: Valuations decreased in all but one of the eight fixed income indices in today’s chart between 3/14/25 and 5/22/25. We believe declining bond valuations continue to reflect reduced certainty in the current investment climate. As told by futures market data, the likelihood of multiple, significant reductions to the federal funds target rate diminished significantly in May. U.S. trade policy continues to be a wildcard, causing investors much difficulty in planning for the near-term. Given these factors, perhaps it is unsurprising that Moody’s reduced the U.S. credit rating from Aaa to Aa1 on 5/16/25, marking the first time the three largest credit rating agencies simultaneously rated U.S. debt below the top tier. That said, we see little reason for this to alarm investors beyond the short-term. Keep in mind that U.S. debt continued to be seen as one of the most liquid and safest assets in the world despite downgrades by S&P back in 2011 and Fitch in 2023. We will continue to update this post throughout the year.

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 Morningstar LSTA U.S. Leveraged Loan 100 Index is a market value-weighted index designed to measure the performance of the largest segment of the U.S. syndicated leveraged loan market. The ICE BofA U.S. High Yield Constrained Index tracks the performance of U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofA 22+ Year U.S. Municipal Securities Index tracks the performance of U.S. dollar denominated investment grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions with a remaining term to maturity greater than or equal to 22 years. The ICE BofA Fixed Rate Preferred Securities Index tracks the performance of investment grade fixed rate U.S. dollar denominated preferred securities issued in the U.S. domestic market. The ICE BofA 7-10 Year U.S. Treasury Index tracks the performance of U.S. dollar denominated sovereign debt publicly issued by the U.S. government with a remaining term to maturity between 7 to 10 years. The ICE BofA U.S. Mortgage Backed Securities Index tracks the performance of U.S. dollar denominated fixed rate and hybrid residential mortgage pass-through securities publicly issued by U.S. agencies in the U.S. domestic market. The ICE BofA U.S. Corporate Index tracks the performance of U.S. dollar denominated investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofA Global Corporate Index tracks the performance of investment grade corporate debt publicly issued in the major domestic and Eurobond markets.

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View from the Observation Deck

As the Q1’25 earnings season concludes, we thought it would be timely to provide an update regarding 2025 and 2026 earnings and revenue growth rate estimates for the sectors that comprise the S&P 500 Index (“Index”). The Index closed at 5,940.46 on 5/20/25, down 2.97% (total return) from its all-time high of 6,144.15 (2/19/25), but up a staggering 19.41% (total return) from its most recent low of 4,982.77 (4/8/25). For comparison, from 1928-2024 (97 years) the Index posted an average annual total return of 9.71%. The table above presents the 2025 and 2026 calendar year earnings and revenue growth rate estimates for the broader S&P 500 Index and each of its 11 sectors.

Despite a decline since our last post, earnings growth estimates remain favorable in 2025.

Earnings for the companies that comprise the Index are estimated to increase by 7.4% year-over-year (y-o-y) in 2025, down from 12.4% in our last post on this topic in January (click here). Three sectors are estimated to see earnings decline y-o-y in 2025: Energy (-11.8%); Consumer Discretionary (-0.9%); and Consumer Staples (-0.7%). In 2026, however, earnings are estimated to increase for each of the Index’s 11 sectors, with Energy leading the way amidst favorable comparisons to 2025’s earnings.

Revenue growth rate estimates remain favorable as well.

As of 5/16/25, the Index’s 2025 estimated y-o-y revenue growth rate stood at 4.3%, down from 5.6% on 1/24/25. Ten of the eleven sectors that comprise the S&P 500 Index reflect positive y-o-y revenue growth rate estimates for 2025, with four of them estimated to surpass 5.0%, down from seven in our last post. Information Technology commands the highest estimated revenue growth rates at 10.9% and 10.1% in 2025 and 2026, respectively.

Takeaway: Equity markets are forward-looking discounting mechanisms, meaning the price of an efficient market should reflect the sum-effect of present and future (expected) events. In our view, this years’ volatility is an indication of the difficulty market participants have had in discounting potential tariffs and weakening economic data against corporate earnings and revenues. While they are lower than where they stood in January, the Index’s current-year earnings and revenue estimates continue to reflect strength. Notably, next year’s estimates are even higher. As always, estimates are subject to change as new information is disclosed within the market. Time will ultimately reveal the accuracy of these estimates, but we maintain that higher revenues could be the best catalyst for earnings growth, which in turn, may continue to drive equity prices higher.

This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. 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 companies 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

We update this post on an ongoing basis to provide investors with insight regarding the earnings climate of the S&P 500 Index (“Index”). While quarterly earnings estimates are a useful indicator of a company’s financial performance, they are not guarantees. Equity analysts are continually adjusting these estimates as new information is obtained. As of 5/9/25, 451 of the 503 stocks that comprise the Index (89.7%) had reported Q1’25 earnings.

FactSet reported that the Q1’25 blended, year-over-year (y-o-y) earnings growth rate for the Index stood at 13.6% as of 5/16/25, marking the seventh consecutive quarter of y-o-y earnings growth for the Index.

Should this hold, it will mark the second consecutive quarter of double-digit earnings growth for the Index.

The percentage of Index companies that beat earnings expectations in Q1’25 (76.7% as of 5/9/25) sits just 0.3 percentage points below the 4-year average of 77.0%.

Keep in mind, the 4-year average in today’s chart reflects favorable comparisons to COVID-era earnings in 2020 and 2021. We expect the average will decline as those results are removed from our dataset.

The three sectors with the highest Q1’25 y-o-y earnings growth rates and their percentages were as follows (as of 5/16/25): Health Care (42.9%); Communication Services (29.2%); and Information Technology (17.5%). For comparison, Materials, Consumer Staples, and Energy suffered y-o-y earnings growth rates of -2.6%, -5.9%, and -12.7%, respectively.

As of 5/9/25, the sectors with the highest Q1’25 earnings beat rates and their percentages were as follows: Health Care (90.9%); Communication Services (90.0%) and Information Technology (86.5%), according to S&P Dow Jones Indices. Real Estate had the lowest beat rate at 60.0% and Consumer Discretionary had the highest earnings miss rate (31.7%).

Takeaway: As revealed in today’s chart, the earnings beat rate for the companies that comprise the S&P 500 Index was below average in most of the time frames presented (including the most recent quarter). That said the average earnings beat rate in today’s chart includes unusually large observations in 2021 and early 2022 when companies were recovering from COVID lockdowns. A longer view offers a secondary perspective. S&P 500 Index companies beat quarterly earnings estimates 74.6% of the time over the ten-year period ended Q1’25. Just two of our last eight quarterly observations lie below this average. While down slightly, analyst estimates for 2025 and 2026 calendar year earnings continue to reflect strength. On 5/16/25, FactSet reported that the Index’s earnings per share are estimated to total a record 265.02 and 300.15 in 2025 and 2026, down from 271.28 and 308.88, respectively, in our last post on this topic. As always, these estimates are subject to change as new information is made available. We will continue to report on this topic as relevant data arises.

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

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 FactSet 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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