March 3, 2025 (Maple Hill Syndicate) – In the first two months of this year, technology stocks fell more than 4% and consumer discretionary stocks fell about 5%. They were the only two sectors with losses among the 11 market sectors tracked by Standard & Poor’s Dow Jones Indices.
Is that the way this year is going to go? I don’t think so. Here’s my take on each sector.
Technology
One year ago I wrote, I’d pencil the tech group in for a 15% gain over the coming 12 months. That was pretty close. The actual figure was 18.4%.
For the coming 12 months, I predict that technology stocks will score single-digit gains, and so will the overall market. Let’s face it: Stock prices are on the high side.
Need examples? Microsoft Corp. (NASDAQ:MSFT) sells for 32 times earnings, Apple Inc. (NASDAQ:AAPL) for a 38 multiple, and Nvidia Corp. (NASDAQ:NVDA) for a price/earnings ratio of 42. As the Wall Street adage says, trees don’t grow to the sky.
Utilities
Very few people would guess what the best performing sector of the past 12 months was. It was utility sector, up 31.7%. Investors got excited about utilities on the premise that data centers will suck up vast amounts of electricity, spurring demand.
That enthusiasm has started to deflate, and I think utilities will have meager gains in the next 12 months.
Financials
Next best in the past 12 months was the financial sector, with a 31.5% gain through February. I think it continue to do well. One reason: Long-term rates are back above short-term rates, as they should be. Also, loan demand might pick up, and insurance regulators have been allowing big premium increases.
Communications
The S&P’s communications services sector is dominated by Alphabet Inc. (NASDAQ:GOOGL), Meta Platforms Inc. (NASDAQ:META), Comcast Corp. (CMSCA), and Verizon Communications Inc. (VZ). This was the third-best performer in the past 12 months, up 29.2%.
I’m guessing the sector will do pretty well in the year ahead. Comcast and Verizon look cheap at 9 and 10 times earnings respectively.
Consumer Staples
In the staples sector you see the likes of Walmart Inc. (NYSE:WMT), PepsiCo Inc. (NASDAQ:PEP) and Procter & Gamble Co. (NYSE:PG). This group had a good move in the past 12 months, up 19.3%. I expect smaller gains in the coming 12 months. I feel that investors are overpaying for these stocks’ presumptive stability.
Real Estate
The real estate segment did respectably in the past 12 months (up 14.3%), but my friends who are in that business tell me that vacancy rates are still high and that buildings are still too expensive. I suggest going light or bare here.
