This article first appeared on GuruFocus.
John DorfmanMarch 2, 2026 (Maple Hill Syndicate)
Think of the U.S. stock market as a pizza. According to Standard & Poor’s, it’s cut into 11 slices, or sectors.
Astute or poor sector selection often makes the difference between a good year in the market and a bad one. Below are my views on the 11 sectors, listed in order of their performance in the 12 months through January (the period return). During that time, the S&P 500 Total Return Index returned 16.35%.
Period return: 29.5%
The communication services sector includes media and internet stocks such as Alphabet, Meta Platforms, Netflix and Walt Disney, as well as traditional telecom companies such as AT&T, Verizon Communications and T-Mobile US.
I think the group will continue to do well. Many of these companies are advertising-dependent and should benefit from political advertising in an election year.
Period return: 25.6%
Technology stocks surged over the past three years but have sputtered so far this year as investors worry about massive data center expenditures.
My stance is to maintain exposure, but underweight. Technology remains the hub of innovation; ignoring it would be unwise. However, valuations make me uneasy.
For example, Nvidia sells for about 36 times earnings, Taiwan Semiconductor Manufacturing about 30 times, and Microsoft about 25 times. By comparison, the long-term average market multiple has been about 15, and currently sits closer to 24.
Period return: 21.8%
I like oil-and-gas stocks. Oil prices fell in 2025 due to abundant supply but have risen this year amid Middle East tensions. In January, energy was the best-performing sector, jumping 14%.
The Trump administration has eliminated incentives for electric vehicle purchases. Combined with a severe winter in 20252026, that environment favors traditional energy companies.
Period return: 21.3%
This is my favorite sector for two reasons: reasonable valuations and strong defense exposure.
In a world where the U.S. faces heightened tension with China, Russia and Iran, defense spending is rising. Interestingly, my preferred defense stocks are European, not American. Europe is being pushed by both Vladimir Putin and Donald Trump to increase defense spending after decades of relative restraint.
Period return: 14.3%
Utilities, usually considered dull, have attracted attention because tech companies require vast electricity to power data centers.
