Genius remains a bull market so far in 2025. All the main sectors in the US equities market are posting year-to-date gains, led by financials and health care, based on a set of ETFs through Thursday’s close (Feb. 6).
The Financial Select Sector SPDR ETF (XLF) is up 7.8% so far this year. Health care (XLV) is a close second-place performer with a 6.9% year to date rise. Both funds are well ahead of the overall stock market’s 3.5% rise so far in 2025, based on SPDR S&P 500 (SPY).
Notably, the tech sector (XLK) is currently the laggard year to date. After flying high in recent years, this slice of the market is posting a relatively sluggish gain of just 1.0% so far in 2025.
A new headwind this year for the formerly leading tech sector is the recent launch of DeepSeek, an artificial intelligence (AI) company in China that’s seen as a low-cost threat to US-led AI firm.
“We think 2025 is the year the investing world realizes China is outcompeting the rest of the world,” writes Deutsche Bank analyst Peter Milliken wrote in a report titled “China Eats The World.” He predicts: “Investors we believe will have to pivot sharply to China in the medium term, and will struggle to get access to its stocks without bidding them up.”
The market, for the moment, seems to agree from a sector perspective and has downgraded US big-tech firms’ performance after two calendar years of red-hot gains.
Meanwhile, the crowd has pivoted to the financial sector since the election. Barron’s this week labels the sector’s rally as “Wall Street’s latest momentum trade du jour” and that “the financial services sector got a big lift from President Donald Trump’s victory in November. Shares of many major banks as well as regional leaders have continued to rally since then.”
XLF’s momentum is certainly strong these days. In yesterday’s trading the fund edged up to a new record high. Adding to the tailwind is yesterday’s news that the Federal Reserve’s new annual stress test for banks shows lesser hypothetical shocks to the US economy vs. previous years.
“The 2025 stress test scenario, broadly better vs last year, increases our confidence that banks should begin to see relief on regulatory capital requirements, given our expectations for a shift to a balanced, transparent, and more predictable regulatory regime,” writes Bank of America analyst Ebrahim Poonawala Poonawala in note yesterday.
