RBC's S&P 500 sector picks and pans for 2025
Nasdaq edges green, S&P 500, Dow slip
Utilities lead S&P sector gainers; Staples weakest group
Euro STOXX 600 index up ~0.2%
Dollar, bitcoin dip; gold rises; crude up >1%
U.S. 10-Year Treasury yield edges down to ~4.18%
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RBC'S S&P 500 SECTOR PICKS AND PANS FOR 2025
RBC says the landscape for the S&P 500 .SPX sectors presents a mix of opportunities and challenges, as 2025 is approaching.
The brokerage's top sector picks for next year are financials .SPSY, energy .SPNY, and communication services .SPLRCL. Meanwhile, RBC says sectors like healthcare .SPXHC and materials .SPLRCM warrant caution.
RBC believes financials are positioned for growth, driven by post-election momentum, potential corporate tax cuts, and deregulation. RBC highlights that financials have seen the strongest rates of upward EPS and sales estimate revisions among the major S&P 500 sectors recently.
Energy remains a contrarian pick for the brokerage despite initial post-election underperformance. With attractive valuations and potential tailwinds from a Republican sweep, the sector's resilience on a stronger U.S. dollar and improving fund flows enhance its appeal, RBC says.
Communication Services was upgraded to "overweight," citing its low sensitivity to a stronger U.S. dollar and potential to thrive with rising consumer sentiment. The brokerage emphasizes "the absence of negatives is a positive" for the group.
On the other hand, RBC downgraded Healthcare and materials to "market weight" from "overweight" due to policy uncertainties and sensitivity to a stronger U.S. dollar.
The brokerage is also keeping a close eye on industrials .SPLRCI, technology .SPLRCT, and utilities .SPLRCU. RBC says industrials face tariff concerns and expensive valuations, technology shows strong earnings revisions but elevated valuations, and utilities offer strong earnings revisions but are costly.
Some analysts are expecting U.S. corporate earnings growth to remain strong going into 2025 even as Trump's tariff policies pose a threat.
Separately, Wells Fargo also upgraded financials to "overweight" from "neutral" and downgraded healthcare to "neutral".
(Joel Jose)
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