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What's the Top-Performing Sector This Year? The Answer Might Surprise You.

By Jeremy Bowman, Jason Hall, and Trevor Jennewine – Sep 29, 2021 at 9:00AM

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This sector roundup shows how unpredictable the market has been.

While technology stocks have gotten much of the attention during the pandemic, technology isn't the best-performing sector so far this year. That title belongs to a much sleepier sector: real estate.

In this episode of "The Five" recorded on Sept. 1, Fool contributors Jeremy Bowman, Jason Hall, and Trevor Jennewine go over the performance of different stock market sectors.

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Jason Hall: Who's up for a pop quiz? Pop quiz on, guys?

Trevor Jennewine: It's been a while.

Jason Hall: Yeah. We were going to grade you, Trevor. You're going to get graded. You ready for this?

Trevor Jennewine: All right.

Jason Hall: It's not a total pop quiz. It's very close to a pop quiz, and it's going to be about stock market sectors. Let me see if I can find my chart. I can't even find it. I'm going to have to reopen it. Forgive me for looking away while I'm opening this. But there are 11 different stock market sectors. I'm going to read them out here. I'm going to read out to you. We've got the energy sector. By the way, energy, that's just oil and gas. That doesn't include solar, that doesn't include any renewables because all that stuff's in manufacturing and semiconductors and all these other buckets.

Then you have utilities. These are just the power companies and the water companies and that kind of thing. Then we have real estate, which is real estate. Then we have telecommunications or communication services, industrials, consumer discretionary, consumer staples, basic materials like steel and coal and iron that kind of stuff, healthcare, and financial services. Those are your 11 sectors. You got that part. I'm going to give you a little more information. I'm going to tell you this is the sector that has generated the most in total returns.

Now, these are the S&P 500 buckets. Just looking at of that 500 plus largest US companies, the S&P 500 sectors for the past 10 years. Over the past 10 years, tech sector has by far been the best performer over the past five years. Over the past three years, it's been the best performer. At some point a few months ago, I went back and did some research and looked at every calendar year period going back to 2010 or 2011. I think the tech sector was the best performer in seven or eight out of 10. Technology software is eating the world. Tech is eating the world, continues to be the best performing sector a year-in, a year-out so it seems. No cheating, no looking it up. What's the best performing sector so far in 2021?

Jeremy Bowman: I'm going to guess energy, which I think is a bit contrarian.

Trevor Jennewine: I'm going to guess, I'm going to go with healthcare.

Jason Hall: All right, I'll start with the tech sector. Tech sector, about 22 percent up this year. That's roughly middle of the pack. It's not tech. I think it was pretty obvious since I've said tech, tech, tech, tech, tech. Can't be tech if that is the pop quiz. We've got healthcare, 19.3 percent. So it's actually, even trailing tech. But I want to say that I'm doing this on purpose guys because you guys focus on a lot of technology companies in what you cover.

That's why I wanted to just start there. Now, Jeremy, what did you say? You said energy, 25.6 percent. Better than tech, better than healthcare. For most of the year, if we ever asked you this question anytime up through the beginning of July, you would have been right, it's the purple one, that's the energy sector that was absolutely crushing it for most of the first 2/3 of the year. But it's real estate, up about 32 percent. Financials, 29.3 percent.

Now, I'm going to do some context here and I'm going to look at last year. Energy had a terrible year last year, utilities were strangely down, which do you think in an uncertainty market, companies that pay dividend yields and have steady cash flows will be interesting. Real estate, of course, was down last year.

Of course, tech crushed it last year because everybody needed tech just to exist. Here's the next question. That's the pop quiz you did. We did the pop quiz. Honestly, I wouldn't have guessed real estate, not probably know real estate as well as any other sector. I would not have guessed it. I probably would have guessed financials because banks have had a pretty good year. Despite interest rates, it's going to be in a pretty good year to be a bank.

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