Now that 2024 is in the books, it’s time to look back at the winners and losers for the year. In addition, it’s important to note the top performers in Q4, so we can see which sectors have momentum as the new year begins.

So, let’s dive into 2024 performance, sector-by-sector. Note that all returns discussed here are total returns, which include the effect of dividends paid during the quarter.

11 Sector Review

Select Sector SPDRs are targeted exchange-traded funds (ETFs) that divide the S&P 500 into 11 sector index funds. These sectors are Communication Services, Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Materials, Real Estate, Technology, and Utilities. The 11 Select Sector SPDRs represent the S&P 500 as a whole.

The S&P 500 gained 2.1% for the quarter and 23.3% on the year. Overall, only four of eleven sectors turned in a positive return in Q4. For the year, all eleven sectors were in positive territory, but seven of those sectors underperformed the S&P 500 return.

Here was the sector breakdown for the year.

If you don’t understand why so few sectors outperformed the S&P 500, allow me to explain. The S&P 500 is top heavy with technology companies. If every company in the index had an equal weighting, then each company in the index would contribute 1/500th, or 0.2%, to the overall index performance.

But that’s not the way it is. Apple (NSDQ: AAPL), NVIDIA (NSDQ: NVDA), and Microsoft (NSDQ: MSFT) cumulatively make up more than 20% of the index. Technology companies make up nine of the ten largest holdings. That means that a big year in technology can drive the S&P 500 higher than the average sector performance, which was the case in 2023 and 2024. Note that the opposite happened in 2022, as technology companies dragged down the S&P 500.

The Superstars

There were four outstanding performers for the year.

In first place for the year was Communication Services, which was the 2nd best performer in 2023. The sector added a 7.4% return in Q4 to bring the 2024 return to 34.7%. This sector includes diversified telecommunication services, wireless telecommunication services, media, entertainment, and interactive media and services. Components include Facebook (NSDQ: FB), Alphabet (NSDQ: GOOGL), and AT&T (NYSE: T).

The Financial sector had a great Q4 and wound up as the second-best sector in 2024 with a 30.6% gain for the year. In addition to banks, this group includes financial services firms, insurance companies, and consumer finance companies. Major companies include Berkshire Hathaway (NYSE: BRK.A, BRK.B), JPMorgan Chase (NYSE: JPM), and Citigroup (NYSE: C).

Consumer Discretionary outperformed the S&P 500 in 2023 and did it again in 2024. For the quarter this sector was the top performer with a gain of 12.2% to bring the 2024 gain to 26.5%. This sector includes industries such as automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media, and retailing. It is comprised of companies such as Amazon (NSDQ: AMZN), Home Depot (NYSE: HD), and Walt Disney (NYSE: DIS).

The Utilities sector was 2023’s biggest loser but bounced back in 2024 with a gain of 23.3%. Companies that produce, generate, transmit or distribute electricity or natural gas predominantly make up the Utilities sector. Component companies include NextEra Energy (NYSE: NEE), Duke Energy (NYSE: DUK), and Dominion (NYSE: D).

 

The Laggards

Technology was 2023’s best performer and returned another 21.6% in 2024. The sector was one of only four that outperformed the S&P 500 in Q4, returning 3.2% for the quarter. The Technology sector includes technology hardware, storage, and peripherals; software; communications equipment; semiconductors and semiconductor equipment; IT services; and electronic equipment. Components of this ETF include Apple (NSDQ: AAPL), Microsoft (NSDQ: MSFT), and Intel (NSDQ: INTC).

The Industrial sector closed 2024 with a gain of 17.3%, good for 6th place among sectors. Industrial sector component industries include building products, construction and engineering, electrical equipment, conglomerates, machinery, and aerospace/defense. Important constituents of the Industrials sector include Boeing (NYSE: BA), 3M (NYSE: MMM), and Honeywell (NYSE: HON).

Consumer Staples was down 4.6% in Q4 but still managed a 12.2% gain on the year. Making up this sector are companies involved in the development and production of consumer products that cover food and drug retailing, beverages, food products, tobacco, household products, and personal products. Component stocks include Procter & Gamble (NYSE: PG), Philip Morris International (NYSE: PM), and Coca-Cola (NYSE: KO).

The Energy sector was in last place for much of the year but pulled ahead of three other sectors to close the year. Modest energy prices in 2024 led to modest profits relative to the sky-high profits of 2021 and 2022. Performance was uneven within the sector, though, with midstream companies turning in double-digit gains. Chevron (NYSE: CVX), ConocoPhillips (NYSE: COP), EOG Resources (NYSE: EOG), and Schlumberger (NYSE: SLB) are major components of the energy ETF.

The Real Estate Index started the year strong but ended up with a gain for the year of only 5.1%. That was largely a result of an 8.0% decline in Q4. This index consists primarily of real estate management and development companies and real estate investment trusts (REITs). Simon Property (NYSE: SPG) and American Tower (NYSE: AMT) are among the largest representatives of this group.

The Health Care sector took a big hit following the presidential election and the announcement of Robert F. Kennedy Jr. as the nominee for United States Secretary of Health and Human Services. The sector has declined by double-digits since the election and closed 2024 with a meager 2.5% gain. The sector includes health care equipment and supplies, health care providers and services, biotechnology, and pharmaceuticals industries. Bellwethers in the health care sector include Johnson & Johnson (NYSE: JNJ) and Pfizer (NYSE: PFE).

The Materials sector was also down double digits in Q4, and that led to it barely breaking even in 2024. The primary factors there were a slowdown in China’s economic recovery, coupled with weakening industrial demand in Europe and other key markets, which reduced demand for raw materials such as metals, chemicals, and construction materials. This sector includes companies that produce chemicals, construction materials, metals and mining, and paper and forest products. Among its largest components are DowDuPont (NYSE: DWDP) and Sherwin-Williams (NYSE: SHW).

Looking Ahead

The stock market in 2025 faces a mixed outlook as investors navigate evolving economic and geopolitical landscapes. Moderating inflation and a steady interest rate environment could provide a stable foundation for growth but concerns about slowing global economic activity and persistent geopolitical tensions may weigh on sentiment.

Sectors tied to technological innovation, particularly artificial intelligence, are likely to remain a focal point for investors, while defensive sectors such as utilities and healthcare may attract attention amid uncertainty. Corporate earnings growth is expected to normalize following a strong rebound in prior years, and valuation pressures could emerge in overheated segments.

While volatility may persist, the broader market outlook remains cautiously optimistic, with opportunities for gains tied to strategic sector allocation and resilient business models.

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