Google Gemini response
Yes, many major stock market analysts are discussing and in some cases, predicting a continuation or acceleration of sector rotation in the months ahead, particularly as the market heads toward the end of 2025.1
The general theme is a shift away from the narrow, tech-led growth that dominated the market for several years, toward a broader market participation, often favoring Value and Cyclical/Defensive sectors.2
Here are the key points from analyst predictions:
1. Shift from Growth to Value3
- Undervalued Areas: Analysts at Morningstar note that small-cap and value stocks are the “last bastions of value left,” with growth stocks trading at a significant premium.4 They suggest value is much more attractive on a relative basis.5
- Economic Drivers: This shift is being fueled by macroeconomic elements, including expectations of Fed rate cuts, which historically can benefit smaller and more economically sensitive companies, as well as the high valuations of the mega-cap tech stocks.
- The “Broadening” Rally: The market rally is seen as having already started to “broaden out” in 2025, pulling in sectors that had previously lagged, suggesting the bull run may have deeper roots than just tech.6
2. Specific Undervalued Sectors
In their outlook for the end of 2025, some analysts highlight specific sectors that appear undervalued and may attract rotation:7
- Real Estate
- Energy
- Healthcare
3. Other Areas of Focus (Rotation Targets)
Analysts also point to other sectors and asset classes that stand to benefit from current economic themes and are considered more “value-sensitive” or cyclical:
- Financials
- Industrials and Basic Materials (tied to infrastructure spending and cyclical trends)8
- Utilities (due to heightened demand for energy to fuel AI and data centers)9
- International and Emerging Markets (which are seen as undervalued relative to U.S. equities and are benefiting from the broader cyclical rotation).10
Summary of Rationale for Rotation
The expected rotation is being driven by a mix of factors:
| Factor | Impact on Market |
| High Tech Valuations | Growth stocks (especially mega-cap tech) are at or near high premiums, prompting investors to seek better value elsewhere. |
| Economic Slowdown | Forecasts for slowing U.S. GDP growth and potential recession risks typically favor more defensive sectors and value stocks. |
| Monetary Policy | Expectations for the Federal Reserve to cut interest rates would lower borrowing costs, which often supports smaller companies and the broader economy, favoring a rotation out of the most highly valued “growth” names. |
| Geopolitical & Trade | Policy uncertainties like tariffs are creating cross-currents that can favor more domestically focused or defensive industries. |
In short, the prevailing sentiment is that a rotation is either underway or highly likely to continue through the end of 2025 as investors move toward undervalued sectors and away from concentrated, premium-priced growth stocks.11
