Here's the only stock sector to record negative returns in 2025

• Basic materials led all sectors with 36.3% gains, while communication services rose 31.1% and technology gained 22.7%
• High borrowing costs particularly hurt debt-heavy REITs, while office and retail segments faced weak demand and refinancing risks
• Despite the decline, analysts suggest real estate could recover if interest rates ease and property fundamentals improve in the coming year

2025 Stock Sector Performance Summary

As 2025 concludes, real estate stands as the only major U.S. stock sector posting negative returns, down approximately 0.4% year-to-date among the 11 major sectors.

Top Performing Sectors:

• Basic Materials: +36.3% (leading sector)
• Communication Services: +31.1%
• Technology: +22.7%
• Financials: +22.5%
• Industrials: +18.7%
• Utilities: +16.7%
• Healthcare: +15.1%
• Consumer Cyclical: +8%
• Energy: +6.2%
• Consumer Defensive: +4.4%

Real Estate Decline Drivers:

The sector's underperformance stems primarily from sensitivity to elevated interest rates throughout 2025, which pressured valuations and profitability, particularly for debt-heavy Real Estate Investment Trusts (REITs). Higher yields made fixed-income alternatives more attractive than income-focused real estate stocks.

Sector-specific challenges included weak demand in office, retail, and some residential segments, along with refinancing risks and sluggish commercial property recovery. While healthcare and specialized real estate niches showed resilience, their gains couldn't offset broader weakness.

Market Context:

Other sectors benefited from stronger earnings growth and sustained risk appetite. Technology and communication services gained from continued AI innovation and capital investment, while financial stocks benefited from the higher interest rate environment. Basic materials led due to firm commodity prices and industrial demand.

Outlook:

Real estate recovery potential exists if interest rates ease and property fundamentals improve, though it remains the sole major sector finishing 2025 with losses.