Summary
In the second half, the U.S. large-cap market has continued its rotation toward new favorite sectors. A surprising six sectors are doing better than the market. In 2H23, the three growth sectors that led in the first half won the year and were the only outperformers in the second half of that year. The rotation toward new sectors includes an intense pivot toward perceived beneficiaries of a lower interest rates. The best sector in the second half has been Financial, with a 25.9% gain between midyear and the end of November. The second- and third-best sectors in 2H24 have interest-rate sensitivity. The Utility sector is up 20.1% in 2H24 to date; and Real Estate is up 17.7%. Utilities have a well-established history of outperformance in a falling interest-rate environment. REITs have a less-clear relationship. They were long buried in the Financial sector. And REITs are impacted not only by the yield curve but by secular changes wrought by COVID-19. The Industrial sector has had a big 2H, rising 20.5% with gains partly weighted to the post-election period. Consumer Discretionary has done an about-face from the first half, rising 21.9% in the second half on hopes that lower rates will drive big-ticket consumer spending. The sixth of six sectors be
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