Stock Sector Outlooks: Morningstar’s Top Picks Across the Market

It may have seemed like the only stocks that mattered in 2025 were artificial intelligence plays and other technology names. But under the hood, financials, basic materials, and even healthcare had a strong year.

Where do we go from here? We’ve collected the sector outlooks from across the market and Morningstar’s top picks in each.

Technology

With the AI boom and cloud computing, the outlook remains strong for technology stocks. Morningstar’s favorite names in the sector include NXP and Microsoft.

Communication Services

Alphabet was a clear winner in 2025, but Michael Hodel, director of communication services equity research for Morningstar, explains why Omnicom and Comcast are among Morningstar’s preferred stocks here.

Utilities

When utilities stocks began to retreat in October, they lost out on topping technology as the best-performing sector in 2025. But US utilities still beat the market for the second consecutive year. Morningstar utilities analysts Travis Miller and Andrew Bischof dig into the outlook and offer up top picks of Edison and Alliant.

Consumer Cyclicals

Erin Lash, a sector director of consumer equity research, highlights why Morningstar favors Spin Master and Under Armour.

Financials

Financial stocks were among the market’s best performers in 2025. While the fundamentals still look good, valuations look increasingly rich. Against this backdrop, Sean Dunlop, a director for Morningstar, offers up three top picks in the sector.

Real Estate

Real estate stocks struggled in 2025, gaining just over 4.0%, well behind the 17.4% gain on the broad market. Kevin Brown, a senior equity analyst at Morningstar, digs into whether these stocks can improve, and he highlights top picks in the sector.

Consumer Defensives

Nearly half of the companies within Morningstar’s consumer defensive coverage are undervalued, which Lash says signals opportunities for investors. She highlights three stocks, including Kraft Heinz.

Energy

Against a backdrop of growing geopolitical risks, energy companies are facing the headwinds of slower demand and lower oil prices. Morningstar director Josh Aguilar looks at two stocks that the team thinks can outperform in this environment.

Basic Materials

This sector may have outperformed in the final quarter of 2025, but 55% of these stocks are undervalued. Seth Goldstein, a senior equity analyst at Morningstar, explains why Albemarle and Corteva are the top picks in this sector.

Industrials

With the Federal Reserve cutting interest rates and a still-healthy economy, industrials had a solid finish to 2025. But the sector looks fully valued to Morningstar analysts. Morningstar director Suryansh Sharma offers names that he believes still have room to run.

Healthcare

After a tough start to the year, healthcare stocks nearly closed the gap with the overall market to close out 2025. Karen Andersen, who leads Morningstar’s healthcare team, explains why the outlook appears strong for the sector and highlights her top picks.