It’s been a rough year for the US stock market so far, but you wouldn’t know it by looking at year-to-date returns for energy and healthcare shares, based on a set of ETFs through Friday’s close (Mar. 21). Both equity sectors are posting strong gains in 2025, marking them as standout winners when the market overall is nursing a moderate loss.
The Energy Select Sector SPDR ETF (XLE) is up 8.0% so far this year, far ahead of the broad market, which is nursing a 3.5% year-to-date loss. Healthcare stocks (XLV) are a strong runner-up performer, rising 6.6%.
Most equity sectors are posting gains this year, but the advances are mild and in some cases trivial. Meanwhile, there’s nothing trivial about the red ink for the losers: technology (XLK) and consumer discretionary stocks (XLY) are the downside outliers in 2025 with losses of 8.0% and 12.0%, respectively.
The winning energy and healthcare sectors offer a bullish compliment to the rest of the field, but there are caveats to consider. For energy, trading has been choppy and range-bound. The lack of trend suggests that the near-term outlook remains mixed at best.
Healthcare looks more encouraging from the technical perspective. After bottoming in late-2024, XLV has rebounded, although it’s stalled recently.
In an interview last week, Morningstar’s director of healthcare equity research said part of the sector’s strength lately is the rebound effect after a rough December. “Healthcare stocks had a really hard time [at the end of 2024]. There was a lot of fear about regulatory and policy changes under the new Trump administration. So part of it is kind of a rebound, I think, from that.”
She also notes that the biopharma firms she covers, representing about half the US market cap in healthcare, “just had very strong fourth-quarter results, very strong outlook for 2025. I think a lot of good solid responses to those published earnings.”
The uncertainty factor that’s weighed on the market generally has also been helpful for healthcare, she explains. “I think we’re at a time where there’s a lot of uncertainty about whether there could be a recession. And healthcare, it’s always a defensive area because we continue to need care regardless of what the economy is doing. So I think it’s a few things working together to create that momentum.”
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