By Haddon Libby
An investment quilt is a visual representation that shows the performance of different asset classes or sectors over a specific period. Each “square” of the quilt represents a different sector, and its performance over the year.
For example, in the top left box under 2024, you will see a little robot and 36%. This translates to mean Technology stocks were up 36% in 2024. The legend to the far right shows ‘% of US Market’. Beneath it is another robot and 31%. This means that Technology stocks represent 31% of the US stock market.
Stocks are classified into the eleven industry categories shown below Technology. Financial companies represent the second largest business sector followed by Consumer Cyclicals and Healthcare. The returns shown for Bonds/Fixed income represent the change in value of the bond, not the actual return.
Over the years, various technology stocks have been reclassified in other business sectors. For example, Google and Meta are now considered Communications stocks and are responsible for returns in the Communication squares. Other stocks in that sector are the cellphone and media companies.
Amazon is one of the largest tech companies in the world but is categorized as a Consumer Cyclical due to the Amazon Prime business. Amazon and Tesla are largely responsible for returns in their business sector. While Amazon rivals Walmart, Walmart is categorized as a Consumer Staple.
As expected, GenAI dominated the investment landscape in 2024. The projected power needs for data centers require the rapid development of electricity supplies. As a result, the Utilities sector had a strong year. Strength in Communications was due to Google and Meta, two of the GenAI leaders. Like Communications, Cyclicals were driven by GenAI leaders, Tesla and Amazon.
Financials had a strong year as interest rates declined, fears of a recession faded, and commercial real estate foreclosures failed to meet expectations. Declining rates in a growing economy suggest loan demand may strengthen. Mergers & Acquisitions activity is expected to be robust over the next two years, which will help with loan volumes and fee generation.
Healthcare struggled as pricing pressure and few new blockbuster drugs failed to emerge. Materials were both the smallest and weakest sector of the market. With China in a deep recession, lower demand hampered raw materials.
Looking at 2025, Technology is again expected to grow at the fastest rate. Software incorporating GenAI is expected to outperform hardware. Tech-led sectors like Communications and Utilities should post strong results. Lower regulation will help Industrials and Financials while Healthcare will struggle under heightened governmental scrutiny.
Haddon Libby is the Founder and Chief Investment Officer of Winslow Drake Investment Management, a Fiduciary RIA firm. For more information on our services, please visit www.WinslowDrake.com. Also, this article is meant for entertainment purposes and is in no way investment advice. Call or email us if you want investment advice.
