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Clear and straightforward S&P 500 sector rankings for smarter investing.

As of January 2025, S&P 500 sector rankings are as follows:

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January 2025 Update: What Sectors Are Leading the Stock Market?

If you’re looking for ideas on where to invest, here’s some good news: every sector of the S&P 500 improved in January compared to December. Health Care held on to the top spot, with Communication Services, Financials, and Information Technology staying strong in second, third, and fourth, respectively. Real Estate made the biggest jump, climbing four spots to fifth after its score rose significantly. On the flip side, Energy barely improved, up just 0.25 points.

What Does This Mean for Investors?

One way to potentially beat the market is by focusing on the top-performing sectors and the best companies within them. This approach—known as sector investing—can pay off, but it isn’t simple. It requires careful planning, timing, and sometimes shifting your investments to take advantage of market trends.

Different sectors tend to do well during certain economic phases. For example:

• Defensive sectors (like Utilities and Consumer Staples) tend to perform better during recessions.

• Growth sectors (like Technology and Consumer Discretionary) thrive during economic expansions.

• Energy and Industrials often shine early in economic recoveries.

If you can spot these cycles and adjust your portfolio to match, you might see higher returns. On top of that, studies show that the best-performing sectors from one year often keep their momentum, at least for a while.

Top Stocks to Watch by Sector

For those who want to focus on strong companies, here are some highly rated stocks in the top-performing sectors:

• Health Care: Incyte (INCY), Medtronic (MDT), Cigna (CI), Amgen (AMGN), Becton Dickinson (BDX), CVS Health (CVS), McKesson (MKC), Thermo Fisher (TMO).

• Technology: Comcast (CMCSA), Alphabet (GOOGL), Meta (META), T-Mobile (TMUS).

• Financials: Charles Schwab (SCHW), Fifth Third Bancorp (FITB), The Hartford (HIG), Ameriprise Financial (AMP), PayPal (PYPL), Visa (V).

• Information Technology: Adobe (ADBE), Microsoft (MSFT), Applied Materials (AMAT), Salesforce (CRM), Motorola Solutions (MSI).

ETFs: A Simpler Option

If picking individual stocks feels overwhelming, you can invest in sector-specific ETFs. These funds give you exposure to an entire sector without needing to choose individual companies.

Risks to Keep in Mind

Investing in sectors can be rewarding, but it comes with challenges:

• Timing the market is hard.

• Constantly rebalancing can lead to extra costs and taxes.

• Putting too much money in one sector or stock increases your risk.

If you want to get started, consider using tools like Should You Invest’s sector rankings to identify strong sectors and companies. And remember, no investment strategy is a sure thing, so do your research and don’t invest money you can’t afford to lose. For full details, check Should You Invest’s website and disclaimer before making any decisions.