UBS Highlights 4 Sectors Set to Lead in 2025

UBS Highlights 4 Sectors Set to Lead in 2025

Key Points:

UBS analysts recommend focusing on tech, financials, industrials, and utilities heading into 2025.

Tech is projected to grow nearly 20% next year, driven by AI innovation and market dominance.

Financials and industrials stand to benefit from pro-business policies under President-elect Donald Trump.

Utilities offer defensive strength amid rising energy demand from AI and EV growth.

UBS analysts have identified four key sectors poised for significant gains heading into 2025. In a note to clients, they emphasized technology, financials, industrials, and utilities as standout opportunities, citing market trends and expectations for pro-business policies under President-elect Donald Trump.

Technology: Leading the Market

Tech is projected to outperform the broader market in 2025, with a 19.8% growth forecast, compared to 9.4% for the overall market. The sector, which has fueled the S&P 500’s recent bull rally, has benefited immensely from the ongoing AI boom, now contributing nearly 35% of the index’s profits.

Despite concerns of a tech bubble, UBS analysts remain optimistic about sustained growth in the sector, bolstered by AI and cloud computing advancements.

Financials: Boosted by Deregulation

Financial stocks are positioned to benefit most from Trump’s deregulatory agenda and proposed corporate tax cuts, which are expected to drive increased deal activity and earnings growth. UBS analysts see significant upside for this sector under the incoming administration.

Industrials: A Better Bet Than Discretionary

While consumer discretionary stocks led November gains with a 13.3% rise, UBS downgraded most discretionary stocks (excluding Amazon) to neutral. Industrials, by contrast, are viewed as more attractive heading into next year, given their strong fundamentals and alignment with cyclical economic growth.

Utilities: A Defensive Powerhouse

Utilities are identified as the best defensive play, supported by strong energy demand from AI data centers and electric vehicles. The MSCI ACWI Utilities Index has surged around 20% year-to-date, reflecting this sector’s resilience and growth potential.

Other Sectors and Market Context

UBS analysts maintain a neutral stance on healthcare and caution against energy, materials, staples, and REITs. They highlighted cyclical sectors’ outperformance in November, driven by optimism around Trump’s policies.

“Cyclical sectors, including financials, industrials, and energy, outperformed in November as traders priced in a pro-growth environment,” the analysts noted.

With a 5.9% November rally in U.S. stocks, UBS remains bullish on select opportunities as 2025 approaches