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Investing.com -- The Industrials sector has emerged as the top performer in the S&P 500 year-to-date, posting a 14.5% gain led by companies in aerospace and defense, power, and capital equipment.
Despite investor questions about a potential shift toward shorter and early cycle industrial stocks such as transports in the second half of 2025, Wolfe Research does not anticipate such a rotation.
The sector’s valuations have reached multi-year highs, with the same stocks driving performance being heavily crowded and momentum-driven. Nevertheless, fundamentals remain robust, supported by durable themes including aerospace/defense and data centers.
Wolfe Research believes the U.S. economy will remain in a later cycle environment through year-end, making a reacceleration in leading indicators like ISM manufacturing unlikely to sustainably rise above the 50-point expansion threshold.
These factors suggest the current leadership within the Industrials sector should persist in the near term.
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