In this article, we discuss 15 worst performing industries in 2023. If you want to skip our detailed discussion on the performance of the stock market in 2023, head directly to 5 Worst Performing Industries In 2023.
In August, Reuters mentioned that according to data from Refinitiv, the projected earnings growth for S&P 500 companies in 2023 stands at 1.8%. Additionally, the index’s forward 12-month price-to-earnings ratio has risen to nearly 19, up from 17 at the end of 2022, and it surpasses its historical average of almost 16. Terry Sandven, the chief equity strategist at U.S. Bank Wealth Management, suggested that the S&P 500 might presently be experiencing a correction phase. He has set a year-end target of 4,600 for the index. He also mentioned that persistent inflation negatively impacts valuations since it implies the Federal Reserve adopting a more hawkish stance for an extended period. Elevated interest rates due to ongoing inflationary pressures lead to reduced present values and lower stock prices.
In September 2023, the S&P 500 experienced a 4.5% decline despite relatively positive economic indicators. Two primary factors that impacted stock prices in the third quarter and will continue to be significant in October are inflation and interest rates. During September, the Federal Open Market Committee chose to maintain the interest rate range of 5.25% to 5.5%. However, Fed Chair Jerome Powell emphasized the need for further effort on managing inflation before ruling out additional interest rate increases. The Fed’s economic forecasts indicate the potential for one more rate hike before reaching the final rate for the current economic cycle. The bond market estimates an 18.3% probability of a 25 basis points rate hike by the Fed on November 1, contrasting with an 81.7% chance that the FOMC will opt not to raise rates once more, as per CME Group. Real personal spending in the United States grew by 0.1% in August, a significant slowdown compared to the 0.6% growth observed in July. The Fed is at a crucial point in its efforts to combat inflation, and the coming months will determine whether it can steer the U.S. economy toward a soft landing without the risk of a recession.
On the other hand, during 2023, the NASDAQ Composite, which monitors the performance of all stocks listed on the NASDAQ stock exchange, experienced a 34% increase in August. This surge has been driven by the influence of artificial intelligence and indications that the nation’s economic recovery is progressing more smoothly than initially predicted. In August, U.S. equities faced a downturn, marking the first monthly decline for the S&P 500 and NASDAQ-100 Indices since February this year. The “Magnificent Seven,” which contributed to over 75% of the NASDAQ-100 gains in 2023 through July, delivered mixed results during August. Although artificial intelligence remains a significant growth driver, the NASDAQ-100, with its heavy emphasis on the tech sector and AI-related discussions, experienced a 1.5% decline for the month of August. Nonetheless, it remains up by over 42% year-to-date.
Tech companies are facing macroeconomic uncertainty marked by decreased consumer spending and market challenges, prompting the need to boost margins and revenue through measures like improving efficiency, implementing automation, modernizing legacy systems, and considering mergers and acquisitions. The crisis pushed numerous tech firms forward, compelling them to expedite their digital transformation, enhance supply chains, embrace as-a-service models, and strengthen their workforce. Amid global uncertainties, they must also focus on risk mitigation and resilience by making strategic decisions about partners, locations, and production methods. The tech sector is expanding its influence into healthcare and other industries using technologies like 5G and AI, while simultaneously adapting to new regulations related to climate change, social impacts, and transparency, which will necessitate updates to management software tools for compliance and data accessibility.
Victoria Greene, Chief Investment Officer at G Squared Private Wealth, in a CNBC “Worldwide Exchange” interview emphasized:
“Being concentrated in these mega-cap tech stocks has been where to be in this market. You cannot deny the potential in AI, you cannot deny the earnings prowess that these companies have.”
On the contrary, the banking sector took a serious hit in 2023 owing to hiked interest rates and rising inflation. American financial institutions had been anticipating a shift towards higher interest rates, but the rapid rate hikes initiated by the Federal Reserve have raised concerns of a potential recession and have created turbulence in the markets. In this article, we discuss the worst performing industries this year.
Photo by Austin Distel on Unsplash
Our Methodology
We researched different industry sectors and related ETFs, selecting the worst performing funds which represent the overall industry performance. We have ranked these ETFs in a descending order based on the year-to-date share price performance as of October 31 as a proxy for industry performance.
Worst Performing Industries in 2023
15. Healthcare
Industry ETF: iShares U.S. Healthcare Providers ETF (NYSE:IHF)
YTD Performance of Industry ETF as of October 31: -6.30%
A report from Deloitte suggested that healthcare industry executives anticipated a challenging year in 2023. Problems such as staffing shortages, inflation, declining profit margins, and supply chain disruptions are expected to persist throughout the year, influencing the strategic decisions of hospitals and health systems. The healthcare industry is categorized as one of the worst performing industries in 2023.
The iShares U.S. Healthcare Providers ETF (NYSE:IHF) aims to replicate the performance of the Dow Jones U.S. Select Healthcare Providers Index, a collection of U.S. healthcare provider companies. It offers exposure to U.S. firms involved in health insurance, diagnostics, and specialized treatments. The ETF was established on May 1, 2006, and its portfolio comprises 68 stocks. Its total assets amount to $$859 million as of October 30, 2023, with an expense ratio of 0.40%. The ETF has seen a decline of 6.30% year-to-date. UnitedHealth Group Incorporated (NYSE:UNH) is one of the top holdings of the iShares U.S. Healthcare Providers ETF (NYSE:IHF), a company engaged in providing healthcare plans for both individuals and businesses.
According to Insider Monkey’s second quarter database, 111 hedge funds were bullish on UnitedHealth Group Incorporated (NYSE:UNH), compared to 116 in the previous quarter. Rajiv Jain’s GQG Partners is the top stakeholder of the firm, with 4.89 million shares worth $2.35 billion.
ClearBridge Large Cap Value Strategy made the following comment about UnitedHealth Group Incorporated (NYSE:UNH) in its Q3 2023 investor letter:
“Our health care positioning also fared well, led by managed care company UnitedHealth Group Incorporated (NYSE:UNH), which beat expectations and raised full-year guidance, supporting our thesis that it can successfully navigate the recent uptick in utilization among its Medicare patients. We continue to maintain an overweight position to managed care companies via long-term holdings in UnitedHealth and Elevance Health, as we believe the short cycle nature of their insurance franchises allows them to reprice their book of business in a relatively short time frame, even if health care costs come in higher than previously anticipated.”
14. Infrastructure
Industry ETF: iShares Global Infrastructure ETF (NASDAQ:IGF)
YTD Performance of Industry ETF as of October 31: -8.27%
Inflation is anticipated to remain high throughout 2023, and this could create challenges for projects in construction and growth due to labor shortages and increased pricing pressures, as reported by J.P. Morgan. The infrastructure industry is placed among the worst performing industries in 2023.
One of the infrastructure ETFs that is in the red this year is iShares Global Infrastructure ETF (NASDAQ:IGF). The iShares Global Infrastructure ETF (NASDAQ:IGF) aims to replicate the performance of S&P Global Infrastructure Index, which is made up of developed market stocks in the infrastructure sector, offering exposure to companies involved in transportation, communication, water, and electricity services worldwide. It has $3.25 billion in assets as of October 30, 2023. The ETF’s portfolio consists of 75 stocks, and it carries an expense ratio of 0.41%. iShares Global Infrastructure ETF (NASDAQ:IGF) was established on December 10, 2007.
NextEra Energy, Inc. (NYSE:NEE) is one of the largest holdings of iShares Global Infrastructure ETF (NASDAQ:IGF). The company produces, transmits, and delivers electricity to consumers in North America. The corporation provides electric power utilizing a variety of sources, including wind, solar, nuclear, coal, and natural gas facilities. According to Insider Monkey’s second quarter database, 59 hedge funds were bullish on NextEra Energy, Inc. (NYSE:NEE), with Two Sigma Advisors holding a significant stake.
13. Real Estate
Industry ETF: Vanguard Real Estate Index Fund (NYSE:VNQ)
YTD Performance of Industry ETF as of October 31: -12.04%
There has been a significant drop in the number of individuals purchasing residential real estate in the market. Due to rising interest rates and inflation, people are moving towards rental properties that are easier on the pocket. The real estate sector is among the worst performing industries due to the reasons mentioned. A real estate ETF which is down this year is the Vanguard Real Estate Index Fund (NYSE:VNQ), which aims to closely mirror the performance of the MSCI US Investable Market Real Estate 25/50 Index. It invests in stocks issued by real estate investment trusts focused on office buildings and hotels. The ETF was introduced on September 23, 2004. As of September 30, 2023, the fund holds net assets totaling $56.5 billion and has a portfolio of 160 stocks. It features an expense ratio of 0.12%.
Prologis, Inc. (NYSE:PLD) is one of the largest holdings of the Vanguard Real Estate Index Fund (NYSE:VNQ). Prologis, Inc. (NYSE:PLD) is involved in logistics real estate, focusing on markets that are not easily accessible and show significant growth potential. According to Insider Monkey’s second quarter database, 50 hedge funds were bullish on Prologis, Inc. (NYSE:PLD), compared to 51 in the previous quarter. Jeffrey Furber’s AEW Capital Management held the largest position in the company, with over 2.5 million shares worth approximately $309.2 million.
Here is what Aristotle Atlantic Partners has to say about Prologis, Inc. (NYSE:PLD) in its Q2 2023 investor letter:
“Prologis underperformed in the second quarter along with the real estate sector, as the appetite for risk in the broad market increased. Prologis’ results have shown less cyclicality during the recent downturn in the sector, so there is less scope for an earnings recovery as is the case in more beaten-down real estate companies. The company announced the acquisition of a 14 million square foot portfolio of industrial properties from Blackstone for $3.1 billion at the end of the second quarter.”
12. Luxury
Industry ETF: Tema Luxury ETF (NYSE:LUX)
YTD Performance of Industry ETF as of October 31: -14.80%
In 2023, due to higher interest rates and inflation taking a toll on shoppers, luxury brands are experiencing a slow growth, making it one of the worst performing industries. The strong post-pandemic shopping spree is showing signs of slowing, as people are feeling the inflation pinch. One of the ETFs in the sector which is down this year is the actively managed Tema Luxury ETF (NYSE:LUX). It focuses on long-term growth by investing in companies in the luxury industry, which typically have strong, growing brands with enduring qualities. This sector includes fashion, accessories, automobiles, hospitality, and beauty. The fund launched on May 11, 2023. As of October 30, 2023, the ETF features a net expense ratio of 0.75%, and its portfolio consists of 29 stocks. The ETF has experienced a decline of 14.80% year-to-date.
L’Oréal S.A. (EPA:OR) is the largest holding of the Tema Luxury ETF (NYSE:LUX). L’Oréal S.A. (EPA:OR) produces and markets cosmetic items for women and men across the globe. The company is organized into four segments – Consumer Products, L’Oréal Luxe, Professional Products, and Active Cosmetics.
11. Utilities
Industry ETF: Vanguard Utilities Index Fund ETF (NYSE:VPU)
YTD Performance of Industry ETF as of October 31: -16.34%
The U.S. utility sector is experiencing significant transformations that are affecting companies of different sizes and service scopes. Anticipated increases in capital spending are being driven by investments in cleaner energy sources and the imperative to improve infrastructure reliability. Different stakeholders, including investors, regulators, and a range of entities with distinct interests, are playing pivotal roles in advancing the industry. Utilities is one of the worst performing industries.
An example of a utility fund in the red this year is Vanguard Utilities Index Fund ETF (NYSE:VPU), which aims to replicate the results of an index that measures the investment performance of utility sector stocks. It includes shares of firms engaged in the distribution of electricity, water, or gas, as well as those functioning as independent power producers. The fund launched on January 26, 2004. As of September 30, 2023, its net assets amount to $6.1 billion, and its portfolio includes 65 stocks. The fund features an expense ratio of 0.10%. The ETF experienced a decline of 16.34% year-to-date.
One of the top holdings of this ETF is The Southern Company (NYSE:SO), which is involved in producing, transmitting, and distributing electricity. It conducts its business through three divisions – Gas Distribution Operations, Gas Pipeline Investments, and Gas Marketing Services. According to Insider Monkey’s second quarter database, 32 hedge funds were bullish on The Southern Company (NYSE:SO), compared to 25 in the previous quarter. Steve Cohen’s Point72 Asset Management is the largest stakeholder of the firm, with 2.3 million shares valued at $158.8 million.
10. Metals and Mining
Industry ETF: Global X Silver Miners ETF (NYSE:SIL)
YTD Performance of Industry ETF as of October 31: -16.62%
The metals and mining sector, one of the worst performing industries, is likely to face challenges throughout 2023 due to a deteriorating global macroeconomic environment. This presents a downside risk as commodity prices decline, and support from equity markets wanes. Producers can expect their margins to narrow, and the exploration sector will likely scale back activity due to tighter financing conditions, according to S&P Global.
The Global X Silver Miners ETF (NYSE:SIL) aims to replicate the price and yield performance of the Solactive Global Silver Miners Total Return Index. It is one of the mining ETFs in the red this year. This ETF was established on April 19, 2010. The ETF’s portfolio includes 36 stocks. Its net assets, as of October 30, 2023, came in at $844.95 million, and it comes with an expense ratio of 0.65%. The ETF has seen a performance drop of 16.62% year-to-date.
Wheaton Precious Metals Corp. (NYSE:WPM) is the top holding of the Global X Silver Miners ETF (NYSE:SIL). Wheaton Precious Metals Corp. (NYSE:WPM) is mainly involved in the sale of precious metals across North America, Europe, and South America. The company focuses on the extraction and sale of gold, silver, palladium, and cobalt deposits. According to Insider Monkey’s second quarter database, 24 hedge funds were bullish on Wheaton Precious Metals Corp. (NYSE:WPM), down from 29 funds in the prior quarter. Jean-Marie Eveillard’s First Eagle Investment Management is the largest stakeholder of the company, with 20.35 million shares worth $879.68 million.
White Falcon Capital Management made the following comment about Wheaton Precious Metals Corp. (NYSE:WPM) in its second quarter 2023 investor letter:
“Precious Metals Royalty basket (Wheaton Precious Metals Corp. (NYSE:WPM), SSL, TFPM): In the current macroeconomic environment, there are many ways to ‘win’ with gold. It is remarkable that even with record positive real yields, gold is flirting with all time highs. Why? Western central banks are increasing interest rates which means that they will have to pay more interest on the record levels of debt that their government’s owe. Where will the money come from to pay the higher interest expense? The answer is simple – more debt and more money printing! We believe the gold knows this! We believe that precious metals will protect real purchasing power and act as a hedge to the portfolio when macroeconomic uncertainty arises. Owning royalty companies at reasonable valuations gives us a high quality exposure to precious metals without project or cost inflation risks inherent in a mining company.”
9. Consumer Staples
Industry ETF: VanEck Future of Food ETF (NYSE:YUMY)
YTD Performance of Industry ETF as of October 31: -18.04%
Morningstar reported that the consumer staples sector of the S&P 500, within the broader large-cap benchmark index, has demonstrated the second weakest performance in 2023, placing it among the worst performing industries. It is currently heading for its largest annual decline since 2018.
One of the consumer staples ETFs in the red year-to-date is VanEck Future of Food ETF (NYSE:YUMY). It is an actively managed ETF with the primary objective of achieving long-term capital growth. VanEck Future of Food ETF (NYSE:YUMY) achieves this goal by investing in businesses involved in agri-food technology and innovation. This includes industries and companies at the forefront of, contributing to, supplying, transforming, or profiting from new environmentally sustainable agricultural and food-related products and services. The ETF was introduced on November 30, 2021. Its portfolio comprises 43 stocks and the ETF offers an expense ratio of 0.69%. The fund has seen a drop of 18.04% year-to-date.
Deere & Company (NYSE:DE) is one of the top holdings of VanEck Future of Food ETF (NYSE:YUMY). Deere & Company (NYSE:DE) produces and markets a range of equipment globally, with its operations divided into four segments – Production and Precision Agriculture, Small Agriculture and Turf, Construction and Forestry, and Financial Services. According to Insider Monkey’s second quarter database, 56 hedge funds were bullish on Deere & Company (NYSE:DE), a decrease from 65 funds in the last quarter.
ClearBridge Large Cap Value Strategy made the following comment about Deere & Company (NYSE:DE) in its Q4 2022 investor letter:
“Our industrials holdings produced robust absolute returns for the quarter. While the ISM Manufacturing Index fell in November to contractionary levels, our industrial holdings have largely been able to maintain earnings due to strong competitive positions, historically large backlogs and company-specific drivers. For example, Deere & Company (NYSE:DE) continues to benefit from a strong upgrade cycle as record farmers’ income is driving broad and rapid adoption of the company’s precision agricultural equipment.”
8. Materials
Industry ETF: iShares MSCI Global Silver and Metals Miners ETF (BATS:SLVP)
YTD Performance of Industry ETF as of October 31: -19.89%
The materials industry has had a significant historical impact. To effectively combat climate change, the world economy must transition to a carbon-free state. However, the materials sector must rapidly boost production to provide essential materials for the shift to a carbon-free future while minimizing environmental harm and reducing its own carbon footprint. Based on the performance of the iShares MSCI Global Silver and Metals Miners ETF (BATS:SLVP), the materials industry is one of the worst performing ones this year.
The iShares MSCI Global Silver and Metals Miners ETF (BATS:SLVP) aims to mirror the performance of the MSCI ACWI Select Silver Miners Investable Market Index. This index comprises global equities of companies primarily involved in silver exploration or metals mining. The ETF was launched on January 31, 2012 and has a portfolio consisting of 34 stocks. It comes with an expense ratio of 0.39%. The ETF experienced a performance decline of almost 19.89% year-to-date.
Pan American Silver Corp. (NYSE:PAAS) is one of the biggest holdings of this ETF. Pan American Silver Corp. (NYSE:PAAS), headquartered in Canada, conducts mining operations in Latin America. The company possesses mines and projects in Mexico, Peru, Bolivia, and Argentina. According to Insider Monkey’s second quarter database, 21 hedge funds were bullish on Pan American Silver Corp. (NYSE:PAAS), up from 19 in the previous quarter. David Greenspan’s Slate Path Capital is the top stakeholder of the firm, with 3.89 million shares valued at $56.69 million.
7. Communications
Industry ETF: SPDR S&P Telecom ETF (NYSE:XTL)
YTD Performance of Industry ETF as of October 31: -20.79%
The communications sector is facing a combination of decreasing earnings and rising expenditure, making it one of the worst performing industries in 2023. It has shown weaker performance in the last ten years when compared to the overall market index. SPDR S&P Telecom ETF (NYSE:XTL) is one of the communications ETFs that is down so far this year. The objective of the SPDR S&P Telecom ETF (NYSE:XTL) is to achieve investment results that generally align with the total return performance of the S&P Telecom Select Industry Index. This index tracks performance of the major telecom companies, including Alternative Carriers, Communications Equipment, Integrated Telecommunication Services, and Wireless Telecommunication Services. The fund was established on January 26, 2011 and its portfolio consists of 40 stocks. It offers an expense ratio of 0.35%. The ETF experienced a decline of 20.79% year-to-date.
Frontier Communications Parent, Inc. (NASDAQ:FYBR) is one of the largest holdings of the SPDR S&P Telecom ETF (NYSE:XTL). Frontier Communications Parent, Inc. (NASDAQ:FYBR) delivers communication and technology services across the United States. Their services include data, internet, voice, video, and other communication solutions. According to Insider Monkey’s second quarter database, 39 hedge funds were bullish on Frontier Communications Parent, Inc. (NASDAQ:FYBR), compared to 40 in the preceding quarter.
6. Healthcare Equipment
Industry ETF: SPDR S&P Health Care Equipment ETF (NYSE:XHE)
YTD Performance of Industry ETF as of October 31: -24.01%
According to S&P Global, the healthcare equipment industry is experiencing a second consecutive year of declining private equity deals. Total investments in healthcare equipment companies worldwide amounted to $6.76 billion by August 22, 2023. The number of deals is also decreasing for a second year in a row. In the first half of 2023, the investment value dropped by 19.1% compared to the previous year, and the second quarter marked the third consecutive quarter of decline. Healthcare equipment is one of the worst performing industries this year.
A healthcare equipment in the red this year is SPDR S&P Health Care Equipment ETF (NYSE:XHE). The primary goal of the SPDR S&P Health Care Equipment ETF (NYSE:XHE) is to replicate the overall performance of the S&P Health Care Equipment Select Industry Index, with adjustments for fees and expenses. As of October 30, 2023, this ETF manages assets worth $287.27 million and maintains an expense ratio of 0.35%. It was first established on January 26, 2011.
Merit Medical Systems, Inc. (NASDAQ:MMSI) is the largest holding of SPDR S&P Health Care Equipment ETF (NYSE:XHE). Merit Medical Systems, Inc. (NASDAQ:MMSI) is involved in the creation, design, production, and promotion of disposable medical items used in interventional, diagnostic, and therapeutic procedures, primarily within the fields of cardiology, radiology, oncology, critical care, and endoscopy. According to Insider Monkey’s Q2 data, Merit Medical Systems, Inc. (NASDAQ:MMSI) was part of 25 hedge fund portfolios, compared to 20 in the prior quarter.
Meridian Growth Fund made the following comment about Merit Medical Systems, Inc. (NASDAQ:MMSI) in its Q4 2022 investor letter:
“Merit Medical Systems, Inc. (NASDAQ:MMSI), designs, develops, manufactures, and markets single-use medical products on a global basis for thousands of purposes ranging from surgical procedures to biopsies. Long focused almost exclusively on revenue growth, the company is now more focused on improving margins, returns and cash flow as part of its three-year strategic plan it rolled out in 2021. Impressively, the company is executing ahead of plan and is on track to achieve its revised financial targets, yet top-line performance remains strong, as evidenced by broad-based 10.5% organic revenue growth in its most recent quarter. Given the prospects for continued outperformance, we maintained our stake in the company.”
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Disclosure: None. 15 Worst Performing Industries in 2023 is originally published on Insider Monkey.
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