To The Moon

As 2024 draws to a close and 2025 approaches, UBS analysts recommended in a Monday report that investors allocate their portfolios to technology, financials, industrials, and utilities.

They noted that under current market conditions and expectations for President-elect Donald Trump to implement pro-business policies, these sectors are likely to perform strongly.

1. Technology Remains the Top Sector

Tech stocks are expected to outpace the broader market next year, with an anticipated gain of 19.8% in 2025 compared to the market's 9.4% increase.

Fueled by the AI boom in recent months, tech stocks have driven the $.SPX(.SPX)$ to record highs in this bull market rally, contributing nearly 35% of the index's total profits over the past year. While some strategists worry about a potential market bubble, UBS analysts remain optimistic.

2. Financials to Benefit Most from Trump's Pro-Business Policies

Trump’s deregulatory stance and proposed corporate tax cuts are widely expected to boost trading activity and profit growth, driving financial stocks higher.

3. Industrials to Perform Well in 2025

Analysts suggest these sectors are more attractive than consumer discretionary stocks, even though the latter led all sectors in November with a 13.3% gain. The rating for consumer discretionary stocks was downgraded to neutral.

4. Utilities: The Best Defensive Play Amid AI and EV Energy Demand

Utilities have excelled in recent months, with the MSCI ACWI Utilities Index up about 20% year-to-date. This performance is driven by increased U.S. electricity demand from AI data centers.

UBS maintains a neutral stance on healthcare stocks and recommends underweighting energy, materials, consumer staples, and real estate investment trusts.