For the last few years, tech has been the darling of investors. First, during the COVID-19 pandemic, as people were glued to Zoom (and Microsoft Teams or Slack, if you like) and hybrid remote work was the talk of the town, the tech sector got a big boost. If that was not enough, a booster dose from the AI explosion put the tech sector in a new growth trajectory.
Between the start of 2020 and mid-2025, the heavy NASDAQ has generated a total return of over 112%, with an average and annualized return of approximately 20.4% and 14.7% respectively. That’s wealth generation on steroids.
But then, just when no one was expecting it, three sectors quietly outpaced tech, a sector that has returned 10.41% year-to-date (YTD) as of writing.
(Image: Yahoo Finance)
The reasons are not hard to guess: tariffs, wars, recessionary concerns, and geopolitical tensions. Are investors ditching tech for better prospects elsewhere? Do we see a shift to the fundamentals and the more primary sectors of the economy? Could this be the start of a major sector rotation? Let’s find out.
Basic Materials (+14.23% YTD)
Let’s start with the surprise leader: basic materials. This sector is up 14.23% YTD, comfortably beating tech and every other major sector.
(Image: Yahoo Finance)
Basic materials’ rise is not out of nowhere. In 2025, the U.S. ramped up tariffs on steel and aluminum imports, doubling them to 50% for most countries. Copper is next in line, with a 50% rate set to kick in on August 1, 2025.
As imports are getting costlier and supply chains are tightening, domestic producers are trying to fill the gaps and eyeing higher profitability. Companies like Steel Dynamics, Freeport-McMoRan, and Nucor have surged, with year-to-date (YTD) gains of 15.39%, 17.65%, and 20.50% respectively. They are a direct outcome of trade policy shifts and real demand coming from a strong economy.
Interestingly, basic materials is booming despite their heavyweight, specialty chemicals lagging behind (it’s up just 1.01% YTD). All the shine is coming from, yes, you guessed it, gold.
Talking about the yellow metal, we can see the classic safe-haven story unfolding in real time: Gold is up 54.42% YTD, fueled by rising global tensions and recession fears. Add to that a 19.71% rise in the building materials segment, and you can see why basic materials have risen over tech so far this year.
Industrials (+14.03% YTD)
Industrials, the runner-up, is not far behind: it’s up 14.03% YTD.
(Image: Yahoo Finance)
Industrials is one sector that we have seen thrive on global movements, both good and bad. Right now, it’s the bad that’s driving it. Wars, rising defense budgets, and mounting security concerns have turned aerospace and defense into one of the hottest corners of the market. That segment alone is up 32.28% YTD.
Look at the big names, and the story tells itself: GE Aerospace has jumped a staggering 57.85% this year; RTX Corporation is up 30.92%, and Boeing has returned 29.57%, despite the company’s ongoing headlines and production issues. These show a clear, macro-driven trend: when global geopolitics are in turmoil after decades of relative peace, defense gets a lot of funding.
Financial Services (+11.12% YTD)
The third sector to outpace tech in 2025 (and perhaps the most quietly) is financial services, up 11.12% YTD.
Within financials, the banking industry alone is up 15.04%, thanks to solid earnings and strong balance sheets. The sector heavyweights are performing well. Citigroup leads the pack with a 32.76% YTD gain. JPMorgan Chase is up 21.51%, and Wells Fargo has added 14.81%. As Barron’s has recently noted, bank earnings have surprised to the upside. The market is convinced about the near-term outlook, and that optimism is being reflected in valuations.
Deposits are expected to keep growing, and if the Fed pivots faster than expected on rate cuts, that could fuel even more upside going into 2026.
Single Stock Signals to Sector Shifts
Tech has had its moment, and it’s still pretty much a dominant force in today’s investment space. But hasn’t smart investing always been about looking beyond headlines and keeping an eye on where capital is quietly shifting?
Sector rotations like the one we are seeing in 2025 come with fundamentals, policy shifts, and global currents that reshape where the market flows. So while we were obsessed with Nvidia, an entirely new theme was playing out in steel mills and defense factories. The ones who noticed early are sitting on returns that even tech failed to beat.
If you’re watching for sector shifts, start with the signals from individual stocks. A few sentiment changes here and there can hint at something bigger.
