Red Ink In A Green Year: 2025's ETF Underdogs

Despite a broad market rally across major asset classes year-to-date, several sectors are experiencing significant underperformance. The oil and gas equipment industry has shed 13.0%, while home construction stocks have been heavily impacted. Concurrently, India's market sentiment has suffered due to tariffs, notwithstanding its projection as the fastest-growing major economy.

Analysis

The year to date has been notable for a broad rally that’s lifted all the major asset classes, but it’s not hard to find a wide array of losers when you look below the Red Ink In A Green Year: 2025's ETF Underdogs Summary - The year to date has been notable for a broad rally that’s lifted all the major asset classes, but it’s not hard to find a wide array of losers when you look below the surface. - The oil and gas equipment industry has shed 13.0% year-to-date. - Home construction stocks have been hammered in 2025. - Although India is expected to be the fastest-growing major economy, according to the World Bank, sentiment has taken a hit this year, in part due to tariffs. James Picerno is the director of analytics at The Milwaukee Co., a wealth manager that is the adviser to The Brinsmere Funds, a pair of global asset allocation ETFs. He also edits CapitalSpectator.com and The US Business Cycle Research Report (CapitalSpectator.com/premium-research). He is the author of three books, including "Quantitative Investment Portfolio Analytics In R: An Introduction To R For Modeling Portfolio Risk and Return." Previously he was a financial journalist at Bloomberg and before that at Dow Jones. The year-to-date market environment, while characterized by a broad rally across major asset classes, masks significant underperformance in specific sectors. Despite overall positive flows, the oil and gas equipment industry has experienced a notable 13.0% decline year-to-date, indicating sector-specific headwinds. Concurrently, home construction stocks have been severely impacted, suggesting challenges within the housing sector despite broader market strength. In emerging markets, India's economic outlook, projected as the fastest-growing major economy by the World Bank, has seen sentiment negatively affected, primarily due to recent tariffs. This divergence highlights a bifurcated market, where strong macro performance does not uniformly translate to all industries or geographies. The mixed general sentiment and moderate market impact score (0.35) reflect this nuanced environment, suggesting targeted risks persist amidst a generally positive backdrop.

Key Decisions for Investors

• Investors should scrutinize sector-specific fundamentals and avoid broad-brush market assumptions, given the significant divergence between overall market performance and specific industry underperformance.
• Consider tactical allocations away from or shorting energy equipment and home construction sectors, which are experiencing substantial headwinds despite a broader market rally.
• Monitor geopolitical developments and tariff impacts on emerging markets like India, as sentiment shifts can present both risks and potential entry points for long-term growth opportunities.