The Race to Outperform the Benchmark Takes a New Turn

The year 2025 has revealed striking new trends in the U.S. equity market. While the S&P 500 remains the most-watched barometer of American business, the real story this year is not the average return—but the dispersion of returns beneath the surface. As of the latest data, just 44% of all S&P 500 stocks are outperforming the index year-to-date. This means that most companies in the benchmark are actually trailing the headline returns. Even more interesting, some sectors—like Utilities and Communication Services—are seeing a much larger share of their stocks beating the index, while others are lagging far behind. The chart you provided offers a rare window into this evolving market structure and raises important questions about concentration, risk, and where investors might find new sources of outperformance.

Quantitative Review: Utilities Lead, Real Estate and Energy Lag
The headline figure from the chart is clear: 74% of Utilities sector stocks are outperforming the S&P 500 in 2025—a dramatic result and a sharp contrast to recent years, when Utilities were considered a defensive, low-volatility, and relatively dull corner of the market. Communication Services also stands out, with 58% of its companies outperforming the index, followed by Technology at 53% and Industrials at 50%. Each of these sectors has a greater proportion of winners than the overall index average.

At the other extreme, Real Estate and Energy are the weakest performers, with only 26%–27% of their constituent stocks beating the S&P 500. Consumer Staples and Health Care also fall below average, with just 30%–37% of their stocks outperforming the index. In the middle, sectors like Materials and Financials post modest numbers, while Technology and Industrials prove themselves as strong, but still not universally dominant, performers.

An additional layer in the chart compares the percentage of stocks in each sector outperforming not the index, but their own sector average. Here, the range spans from just 29% in Industrials, Real Estate, and Energy to as high as 60% in Consumer Staples, highlighting just how much variability exists within sectors themselves.

Deeper Analysis: Why Are Utilities and Communication Services Winning?
The rise of Utilities as the top-performing sector by breadth is a surprising and noteworthy shift. Traditionally, Utilities have been seen as slow-growth, income-oriented, and largely insulated from dramatic swings. This year, however, the sector is benefitting from powerful macro trends: large-scale public and private investment in infrastructure, the transition to renewable energy, and rising demand for essential services. In addition, U.S. government policy favoring green infrastructure, accelerated funding, and tax incentives have added a strong tailwind to the sector’s fundamentals.

Communication Services, meanwhile, is enjoying its own renaissance. The surge is driven by the digital transformation of business and media, growth in streaming and cloud platforms, the integration of artificial intelligence, and massive investments in 5G and next-generation networks. Sector leaders have increased revenues, improved profitability, and captured investor interest in ways that were unimaginable just a few years ago.

Technology and Industrials: Breadth Beneath the Giants
Technology continues to be the engine of the U.S. equity market, with 53% of its companies outperforming the S&P 500 year-to-date. This figure reflects not only the dominance of mega-caps like Apple, Nvidia, and Microsoft, but also the strength of smaller and mid-sized innovators delivering value in a period of rapid technological change. Industrials, typically tied to the global business cycle, are enjoying a renaissance thanks to increased demand for equipment, improved digital manufacturing, and robust order books. Nevertheless, only half of the sector’s companies are beating the index, underscoring the importance of selective stock picking.

The S&P 500: An Average that Masks the Real Dispersion
The fact that less than half the stocks in the S&P 500 are outperforming the index itself underscores a growing concentration problem. A small group of high-flyers—especially in technology and communications—are pulling up the average, while the majority of companies are left behind. This “narrow market” dynamic means that passive index investors may not experience the full upside that the index headline suggests. For active managers, however, there is more potential than ever to create excess returns through smart sector allocation and stock selection.

Weakness in Real Estate, Energy, and Consumer Staples: What’s Behind the Underperformance?
Real Estate stocks have been hit by higher interest rates, falling office demand, and sluggish retail property markets, all of which erode earnings and investor sentiment. Energy, after several years of outperformance, is now suffering from falling commodity prices, oversupply, and the ongoing transition toward renewables. Consumer Staples face intense price competition, rising input costs, and margin pressure from both private-label brands and e-commerce trends. As a result, only a minority of stocks in these sectors are managing to outperform the S&P 500.

Health Care and Financials: Safe Havens or Value Traps?
Health Care, typically seen as a defensive sector, is underperforming this year, with just 37% of its stocks ahead of the index. Regulatory changes, slow drug pipelines, and fierce competition from generics have taken their toll. Financials started the year on solid ground, but have struggled with higher interest rates, increased fintech competition, and weaker lending volumes—leaving only 42% of their stocks beating the index.

Within-Sector Winners: The Importance of Selectivity
The share of stocks outperforming their own sector average ranges widely, offering further insight. In Consumer Staples, for example, 60% of stocks are outperforming the sector, suggesting a wide dispersion of returns and opportunities to pick standout companies even in a challenging environment. By contrast, in Industrials, Energy, and Real Estate, just 29% of stocks are beating the sector average, highlighting the tendency for performance to be concentrated in just a few names.

Strategic Implications: Why Diversification Alone May Not Be Enough
This data makes one thing clear: A passive investment in the S&P 500 no longer guarantees that most portfolio holdings will keep up with the benchmark, let alone beat it. To generate excess returns, investors need to look beyond simple diversification. Sector rotation, tactical asset allocation, and selective stock picking are increasingly important. For those willing to be creative and adaptive—identifying emerging sector winners and the standout stocks within them—2025 offers rich opportunities.

Conclusion and Outlook: Navigating a Dispersed and Dynamic Market
The U.S. stock market in 2025 is as diverse and challenging as ever. The bulk of index returns are concentrated in just a handful of companies and sectors, but Utilities, Communication Services, and Technology all present compelling opportunities for investors looking to outperform. The wide gaps between sectors—and the even greater dispersion within them—underscore the importance of selectivity, adaptation, and active management.