These 3 sectors have had a good run. They still look strong for 2023.
- By Carleton English,
- – 12/30/2022
Yes, the stock market can always get worse—and that means three of this year’s best-performing sectors could continue to outperform in 2023.
After a punishing 2022, Wall Street isn’t expecting the situation to get much better—most economists see a recession sometime in 2023, after all. That means sectors known for their “resiliency” and “durability” will continue to attract investors, while those that were once deemed “growthy” and “buzzy” will continue to shed them. Big Tech and consumer-discretionary stocks are out while investors continue to load up on healthcare, consumer staples, and energy to weather the coming storm.
“We’re looking for areas where people can’t help but to spend,” says Wells Fargo’s Samana.
Sure, energy stocks have fallen 4.5% in December, amid concerns that a recession would mean people use less oil and gas. But even if they’re not loading up their car for a road trip, most people will still need to go to work, which should bode especially well for the Energy Select Sector SPDR exchange-traded fund (
The ETF may not be able to duplicate that in 2023, but the sector has a lot working in its favor. China’s sudden move to reopen its economy after lengthy Covid-19 lockdowns will push up demand, while energy companies look much healthier than they did in 2015-16. Oil prices currently sit well above $70 a barrel—but most companies would be able to stay profitable at $50 a barrel.
Many energy stocks still look cheap. Exxon Mobil (
The sector is poised to do well even if other parts of the market are hurt by the Federal Reserve’s continued efforts to tighten monetary policy and tamp down on inflation, says Baird market strategist Michael Antonelli.
Another hiding spot in a challenging economy has been consumer staples. The Consumer Staples Select Sector SPDR ETF (
“A lot of people think they’re expensive, but when there’s a storm coming, people will pay for resilient earnings,” says Chris Senyek, chief investment strategist at Wolfe Research.
Finally, healthcare is the sector that tops many strategists’ lists after the Health Care Select Sector SPDR ETF (
That’s one way to keep a portfolio healthy.
|For more news you can use to help guide your financial life, visit our Insights page.|