The Market Is Choppy. Here Are 5 Sectors Holding Up Better Than the Rest.
In 2025, all three of the U.S. stock market’s major indexes — the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average — finished the year in the green, increasing 16.4%, 20.4%, and 13%, respectively. So far this year, it has been a completely different story. All of them are in the negative through March.
Investors don’t like it, but right now the market is doing what it tends to do: Go through ups and downs. These cycles aren’t spread out evenly, though. Some sectors have started the year on a much more positive path than others. With the broader market down, here are five sectors (based on S&P 500 companies) that are holding up strong.
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The energy sector has easily been the best-performing sector so far this year. As a collective, the S&P 500 energy sector is up nearly 40% through March. A large part has to do with the conflict in the Middle East and how it has pushed up the price of crude oil (over $100 per barrel at the time of this writing).
Energy stocks have traditionally performed well when crude oil prices rise because they can begin charging a premium (as I’m sure you’ve noticed at the gas station lately). Chevron and ExxonMobil have been two of the S&P 500’s best-performing stocks this year, up 36% and 42% year to date, respectively (as of March 30).
Utility companies have also benefited from the AI boom because they provide the critical power needed to power data centers and the electrical infrastructure. And trust me, it’s a lot. Some studies show that a single ChatGPT search uses 10x more power than a Google search.
Unfortunately, citizens have been footing some of the bill for the increased demand. But from the utility companies’ standpoint, it’s a blessing for their pockets. The sector is in a good place as investors start looking for more stable, dividend-paying stocks. The utilities sector is up 8% this year.
Companies in the consumer staples sector sell products that people buy regardless of market conditions. When the economy is rough, it’s easy for people to not buy new electronics or eat out. It’s not easy (or typically recommended) to avoid groceries, hygiene products, or cleaning supplies.
When the market or economy is more unpredictable than usual, investors tend to prefer the predictability that comes with companies whose businesses continue to thrive. Walmart and Costco are the two largest consumer staple stocks on the market, and they’re up over 11% and 16% this year, respectively. The consumer staples sector is up 7.5% this year.
You may not associate companies in the material sector with AI, but they play an underrated role. Data centers contain a lot of materials and specialized cooling chemicals that come from companies like Linde and Ecolab. For perspective, hyperscaler AI data centers can use up to 50,000 tons of copper each.
Four of the five largest materials companies (by market cap) are up double-digit percentages this year. The materials sector is up 7.4% this year.
We’ve witnessed an increase in infrastructure and manufacturing spending recently. Whether it’s massive AI-related projects (like building data centers) or more general construction, industrial companies have seen their backlogs fill up from increased demand.
There are also the ongoing global conflicts that have led to potential increases in defense spending, naturally benefiting the handful of defense companies that will inevitably get many of these contracts. The Trump administration recently proposed a record $1.5 trillion defense budget, which would make it the largest year-over-year increase post-WWII if it goes through.
The sector is up 1.4% this year.
One common theme among these sectors is that they’re typically seen as the “boring” defensive sectors, especially when compared to sectors like tech or consumer discretionary. Although growth can happen, these companies aren’t typically seen as high-growth, but instead as reliable and shareholder-friendly.
Many of them are also involved in the AI ecosystem without being involved with the tech aspect of it. It’s exposure without having to pick a tech “winner.”
Some of these sectors are cyclical, so the top-performing sectors could look a lot different months from now. However, many of those performing well are checking the boxes you’d expect to see when the sector is doing well.
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Stefon Walters has positions in Walmart. The Motley Fool has positions in and recommends Chevron, Costco Wholesale, and Walmart. The Motley Fool recommends Ecolab and Linde. The Motley Fool has a disclosure policy.
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