Daily Spotlight: Surprise Sector Leaders

Summary

Investors' fascination with AI stocks has not gone away, but has moderated. And AI stock gains may now provide a source of funds for investing in other areas perceived as timely in the unfolding interest-rate environment. During the third quarter, the two best-performing sectors were Utilities and Real Estate. For 3Q24, the iShares Real Estate ETF (IYR) rose just under 17%; the iShares Dow Jones U.S. Utility ETF (IDU) advanced just under 16%. Both sectors, perceived as sensitive to interest rates, historically have moved into favor when market interest rates are declining. Other leading sectors in 3Q24 include Industrial (up 11.6%); Financial (up 9.4%); and Staples (up 8.4%). Healthcare started strong but faded as 3Q24 progressed, while still rising 5.5%. Healthcare stocks are expected to benefit as lower interest rates enable more discretionary medical procedures. But a few big-company missteps slammed the sector in August. The surprise winner in 3Q24 was Consumer Discretionary (up 10.1%). It was among the bottom two sectors in the first half, but lower rates should help the housing and automotive segments. The bottom-five sectors in 3Q24 i