Every S&P 500 Sector Ranked by Real Returns: How 27 Years of Data Compares to Inflation, Money Supply Growth, Gold, and the Broad Market
Have you ever wondered how the sectors in the S&P 500 have performed over time?
The nine major sector ETFs were created by State Street in late 1998.
This article is going to show you 27 years of data across every major sector of the S&P 500.
I compared each sector’s compounded annual growth rate (CAGR) to four benchmarks: inflation, money supply, the broad market, and gold.
TL;DR – Key Takeaways
Every S&P 500 sector beat inflation over 27 years
When you compare sector returns to M2 money supply growth the picture gets more complicated
Only three sectors beat the broad S&P 500 (SPY) over the full period
Gold outperformed each sector despite producing no earnings, paying no dividends, and doing nothing except sitting there
- TL;DR – Key Takeaways
- Why We Compare Sectors to More Than Just Each Other
- The Benchmarks I Used and What They Mean
- The Nine Sectors Ranked: 1999 to 2025
- What Gold's Performance Says About the Last 27 Years
- The Bottom Line
- Frequently Asked Questions
- Which S&P 500 sector has the best long term CAGR from 1999 to 2025?
- Did any S&P 500 sectors beat gold from 1999 to 2025?
- What is CAGR and why does it matter for comparing investments?
- Did S&P 500 sectors beat inflation from 1999 to 2025?
- Did S&P 500 sectors beat M2 money supply growth from 1999 to 2025?
- Why do we compare sector returns to M2 money supply growth?
Why We Compare Sectors to More Than Just Each Other
Most articles about sector performance rank sectors against each other. Is consumer discretionary outperforming consumer staples? Does that mean the market is risk-on or risk-off? How are technology stocks doing? These comparisons tell us how sectors are performing relative to each other, and might give us some information about the state of the market. However, it doesn’t give us any information about what sectors are actually outperforming the market or creating real wealth over time.
I took the nine S&P 500 sector ETFs that have data going back to 1999 and compared their 27 year compounded annual growth rate (CAGR) to four benchmarks. CPI inflation, M2 money supply growth, the broad S&P 500 (SPY), and gold.
The Benchmarks I Used and What They Mean
Before getting into the sectors it helps to understand what we are comparing them to and why each benchmark tells a different part of the story.
CPI: The Official Inflation Rate
The Consumer Price Index (CPI) is the government’s main tool for measuring inflation. It tracks the price of a basket of everyday goods and services including food, housing, healthcare, transportation, and clothing.
From 1999 to 2025 CPI grew at approximately 2.64% per year.
Any investment that does not beat CPI over the long run is losing purchasing power in real terms. Your money is growing in dollar amount but buying less over time. CPI is the minimum bar an investment needs to clear just to keep you even.
M2: The Money Supply
M2 is the total amount of money circulating in the economy. It includes cash, checking accounts, savings accounts, and money market funds.
From 1999 to 2025 M2 grew at 6.34% per year.
I used M2 as a benchmark because it represents the rate at which new money was being created during this period. Any investment that cannot beat M2 growth is arguably just keeping pace with money creation rather than generating genuine new wealth. You can read more about M2 and what it means for ordinary people here. (Analyzing the US Money Supply)
SPY: The Broad S&P 500
SPY is the most widely held index fund in the world. It tracks the performance of the 500 largest US companies. Most ordinary investors who have a 401k or brokerage account own something similar to SPY either directly or through a mutual fund (What is the S&P 500? A Beginner’s Guide to the Market).
From 1999 to 2025 SPY had a CAGR of 8.43% per year.
I used SPY as a benchmark because it represents the performance of the overall US stock market.
Gold: The Unconventional Benchmark
Gold is just a rock in the ground. It doesn’t produce anything, it doesn’t innovate or have any dividends.
From 1999 to 2025 gold had a CAGR of 10.68% per year.
I included gold because it is the purest measure of what happens to purchasing power when a currency is being expanded over long periods of time. Gold holds its value relative to the dollar over a long period of time.
Gold’s price goes up because the dollar devalues over time. Comparing sector returns to gold tells you whether stock market investment actually created new wealth or simply kept pace with monetary debasement. I will come back to this point at the end of the article because it raises a question worth thinking about.
The Nine Sectors Ranked: 1999 to 2025
1. Consumer Discretionary (XLY): 9.78% CAGR
What is the consumer discretionary sector?
Consumer discretionary includes companies that sell things people want but do not necessarily need. The largest holdings in XLY include Amazon, Tesla, Home Depot, and McDonalds. These companies do well when people have more spending money.
The numbers
XLY had a CAGR of 9.78% per year from 1999 to 2025.
Over 27 years a $10,000 investment would have grown to approximately $121,780.
| Benchmark | XLY vs. Benchmark |
|---|---|
| XLY | Baseline |
| CPI | +7.14% |
| M2 | +3.44% |
| SPY | +1.35% |
| Gold | -0.90% |
What the data shows
Consumer discretionary is the best performing sector in the dataset and one of only three to beat SPY over the full period. However, it did not beat gold.
A sector made up of some of the most recognizable consumer brands in the world was outperformed by a metal that does nothing.
2. Technology (XLK): 9.59% CAGR
What is the technology sector?
The technology sector includes companies that make software, hardware, semiconductors, and technology services. The largest holdings in XLK include Nvidia, Apple, Microsoft, and Broadcom.
The numbers
XLK had a CAGR of 9.59% per year from 1999 to 2025.
Over that 27 year period a $10,000 investment would have grown to approximately $115,240.
What the data shows
Technology is the second best performing sector over this period. It is one of only three sectors that beat the broad S&P 500.
However, technology was extremely volatile during this period. The drawdown from the dot com bubble lasted three years and resulted in a cumulative loss of almost 80%. Then there was great financial crisis and pandemic scare.
The 9.59% CAGR would have required you to hold throughout all of those large drawdowns.
| Benchmark | XLK vs. Benchmark |
|---|---|
| XLK | Baseline |
| CPI | +6.95% |
| M2 | +3.25% |
| SPY | +1.16% |
| Gold | -1.09% |
3. Industrials (XLI): 8.99% CAGR
What is the industrials sector?
The industrials sector includes companies that are involved in the following industries: aerospace and defense, industrial conglomerates, marine transportation, transportation infrastructure, machinery, ground transportation, air freight and logistics, commercial services and supplies, electrical equipment, construction and engineering, trading companies and distributors, passenger airlines, and building products.
The largest holdings in XLI include: Caterpillar, General Electric, RTX, GE Vernova, and Boeing.
The numbers
XLI had a CAGR of 8.99% per year from 1999 to 2025.
Over 27 years a $10,000 investment would have grown to approximately $96,850.
| Benchmark | XLI vs. Benchmark |
|---|---|
| XLI | Baseline |
| CPI | +6.35% |
| M2 | +2.65% |
| SPY | +0.56% |
| Gold | -1.69% |
What the data shows
Industrials at 8.99% is the third best sector in the dataset. It slightly outperformed the broad market by 0.44%.
XLI’s returns came from significant defense spending post 9/11, infrastructure investment, and supply chain construction.
Like most sectors, industrials did not beat gold. All of that construction and industrialization did not outperform a metal.
4. Healthcare (XLV): 8.41% CAGR
What is the healthcare sector?
The healthcare sector includes companies involved in pharmaceuticals, health care equipment and supplies, health care providers and services, biotechnology, life science tools and services, and healthcare technology industries.
The largest holdings in XLV include: Eli Lilly, Johnson & Johnson, AbbVie, Merck, and UnitedHealth Group.
The numbers
XLV had a CAGR of 8.41% per year from 1999 to 2025.
Over 27 years a $10,000 investment would have grown to approximately $81,470.
| Benchmark | XLV vs. Benchmark |
|---|---|
| XLV | Baseline |
| CPI | +5.79% |
| M2 | +2.09% |
| SPY | 0% |
| Gold | -2.25% |
What the data shows
Healthcare was essentially even with the broad market during this period. That might be surprising considering how expensive health care has become in the past decade.
Healthcare sticks out from the other sectors because people can’t stop receiving healthcare because of economic conditions. You can put off buying a new phone or laptop. You can’t delay your chemotherapy or medications.
5. Energy (XLE): 7.99% CAGR
What is the energy sector?
The energy sector includes companies in the oil, gas and consumer fuel, energy equipment and services industries.
The largest holdings in XLE include: Exxon Mobile, Chevron, ConocoPhillips, Williams Companies, and EOG Resources.
The numbers
XLE had a CAGR of 7.79% per year from 1999 to 2025.
Over 27 years a $10,000 investment would have grown to approximately $70,640.
| Benchmark | XLE vs. Benchmark |
|---|---|
| XLE | Baseline |
| CPI | +5.35% |
| M2 | +1.65% |
| SPY | -0.44% |
| Gold | -2.69% |
What the data shows
Energy is one of the most volatile sectors in the dataset. The year to year swings are dramatic. Up 40.18% in 2005. Up 36.89% in 2007. Down 38.96% in 2008. Down 32.67% in 2020. Up 53.28% in 2021. Up 64.32% in 2022.
In 2022, the average American worker experienced the worst inflation in 40 years. Energy prices were a significant reason why. XLE returned +64.32% that same year. When it cost more to fuel up at the pump, the energy sector profits.
6. Materials (XLB): 7.79% CAGR
What is the materials sector?
The materials sector includes companies involved in chemicals, metals and mining, paper and forest products, containers and packaging, and construction material industries.
The largest holdings in XLB include: Linde, Newmont Corporation, Freeport – McMoRan Inc., Air Products and Chemicals Inc., and Corteva.
The numbers
XLB had a CAGR of 7.79% per year from 1999 to 2025.
Over 27 years a $10,000 investment would have grown to approximately $66,230.
| Benchmark | XLB vs. Benchmark |
|---|---|
| XLB | Baseline |
| CPI | +5.15% |
| M2 | +1.45% |
| SPY | -0.87% |
| Gold | -2.89% |
What the data shows
Materials at 7.79% sits in the bottom half of the sectors in this dataset. It beat inflation and M2 by meaningful margins but underperformed both SPY and gold.
Materials tend to collapse during recessions and rebound when economic activity returns. It’s a direct exposure to the physical economy.
7. Utilities (XLU): 7.56% CAGR
What is the utilities sector?
The utilities sector includes companies from the electric utilities, water utilities, multi-utilities, independent power and renewable electricity producers, and gas utility industries.
The largest holdings in XLU include: NextEra Energy, Southern Company, Duke Energy, Constellation Energy, and American Electric Power Company.
The numbers
XLU had a CAGR of 7.56% per year from 1999 to 2025.
Over 27 years a $10,000 investment would have grown to approximately $61,640.
| Benchmark | XLU vs. Benchmark |
|---|---|
| XLU | Baseline |
| CPI | +4.92% |
| M2 | +1.22% |
| SPY | -0.87% |
| Gold | -3.12% |
What the data shows
Utilities sits near the bottom of the sector rankings at 7.56% and the reason tells you something important about how regulated industries work.
Utility companies operate in heavily regulated markets. They cannot freely raise prices when costs go up. Their growth is controlled by regulators who balance the interests of shareholders against the interests of ratepayers. That regulation creates stability. People pay their utility bills before almost anything else when money gets tight. But that same stability caps the upside.
8. Consumer Staples (XLP): 6.45% CAGR
What is the consumer staples sector?
Consumer staples includes companies from consumer staples distribution and retail, household products, food products, beverages, tobacco, and personal care products.
The largest holdings in XLP include: Walmart, Costco, Proctor & Gamble, Coca-Cola, and Phillip Morris International.
The numbers
XLP had a CAGR of 6.45% per year from 1999 to 2025.
Over 27 years a $10,000 investment would have grown to approximately $43,980.
| Benchmark | XLP vs. Benchmark |
|---|---|
| XLP | Baseline |
| CPI | +3.81% |
| M2 | +0.11% |
| SPY | -1.98% |
| Gold | -4.23% |
What the data shows
Consumer staples at 6.45% had the second lowest CAGR in the dataset. That’s not too surprising considering consumer staples are viewed as a defensive play. However, safety and stability mean lower growth over the long run. We see that as XLP underperformed the broad market and gold.
9. Financials (XLF): 6.35% CAGR
What is the financials sector?
The financials sector includes companies in financial services, insurance, banks, capital markets, mortgage real estate investment trusts, and consumer finance.
The largest holdings in XLF include: Berkshire Hathaway, JPMorgan Chase, Visa, Mastercard, and Bank of America.
The numbers
XLF had a CAGR of 6.35% per year from 1999 to 2025.
Over 27 years a $10,000 investment would have grown to approximately $42,580.
| Benchmark | XLF vs. Benchmark |
|---|---|
| XLF | Baseline |
| CPI | +3.71% |
| M2 | +0.01% |
| SPY | -2.08% |
| Gold | -4.33% |
What the data shows
Financials had a 6.35% return, however in 2008 it dropped by -54.91%. In one year the financial sector lost over half its value. Its max drawdown was -78%.
The recovery from 2008 was driven in large part by government intervention, Federal Reserve policy, and a decade of near zero interest rates that directly benefited banks and financial institutions. The same policies that suppressed returns on savings accounts for ordinary people and contributed to asset price inflation produced a tailwind for financial sector earnings.
The relationship between monetary policy and financial sector performance is something worth understanding. When the Federal Reserve expands the money supply, financial companies are often among the first beneficiaries.
What Gold’s Performance Says About the Last 27 Years
Here’s an interesting question that you should ask yourself.
Remember that gold is just a metal. It’s not like a stock. Gold doesn’t pay any dividends, it doesn’t produce anything of value, and it doesn’t contribute to the economy. It just exists.
Yet gold was able to outperform all of S&P 500 sectors from 1999 to 2025. These are sectors full of real companies and employees that are doing productive work in the world’s largest economy! How is this possible?
Note: Gold had a 63.68% return in 2025, which significantly effected the 27 year CAGR. However, if gold stayed flat at 0% in 2025, it’s CAGR would be approximately 8.13%. That was still better than five of the nine sectors. Gold had a tremendous 2025, but it doesn’t change the overall story.
So why does gold perform this way?
Gold doesn’t go up in value because it gets more valuable. Gold goes up because the dollar gets less valuable. When the money supply has a CAGR of 6.34% over 27 years, the purchasing power of each dollar declines. Gold reflects that decline. Gold is a measuring stick for monetary debasement.
What does it mean when an asset that measures monetary debasement outperforms eight of the nine sectors in the world’s best economy?
The United States has the most productive economy in human history. We have sophisticated financial markets, innovative companies, and deep capital markets. How can every sector other than technology not outperform gold?
What does it mean about the real productivity of these sectors when they can’t outperform the measurement of monetary debasement? Is it possible that monetary debasement is happening faster than these sectors are creating real wealth?
The Bottom Line
Every sector in this dataset beat inflation over 27 years. Investing in any of the sectors made sure that your money outpaced the increase in cost of living.
Consumer discretionary, technology, and industrials were the only sectors that outperformed the S&P 500.
No sector outperformed gold.
This article isn’t telling you to invest in gold and technology. Nothing in here is financial advice. I’m just presenting the data and asking questions to hopefully help you ask questions of your own. I have my own opinions on what I invest in, but my goal is to peel back the curtain and help you ask questions so you can make better investment decisions on your own.
Frequently Asked Questions
Which S&P 500 sector has the best long term CAGR from 1999 to 2025?
Consumer Discretionary (XLY) had the highest CAGR of any sector from 1999 to 2025 at 9.78% per year. It is one of only three sectors that beat the broad S&P 500 (SPY).
Did any S&P 500 sectors beat gold from 1999 to 2025?
No sector beat gold during this period.
What is CAGR and why does it matter for comparing investments?
CAGR stands for Compounded Annual Growth Rate. It tells you the average annual rate at which an investment grew over a specific period assuming the gains were reinvested each year. CAGR is more accurate than a simple average return because it accounts for the compounding effect and the drag that losing years have on overall performance. It is the standard way to compare long term investment performance across different assets.
Did S&P 500 sectors beat inflation from 1999 to 2025?
Yes. Every sector in this analysis beat CPI inflation over the full period. CPI grew at approximately 2.64% per year from 1999 to 2025. The lowest performing sector, financials (XLF) at 6.35%, beat inflation by 3.71 percentage points per year.
Did S&P 500 sectors beat M2 money supply growth from 1999 to 2025?
All nine sectors beat M2 money supply growth of 6.34% per year but the margins vary significantly. Consumer discretionary beat M2 by 3.44 percentage points per year. Financials only beat M2 by 0.01 percentage points per year.
Why do we compare sector returns to M2 money supply growth?
M2 represents the rate at which new money was created during this period. When new money is created it has to go somewhere. A significant portion flows into asset prices. Comparing investment returns to M2 growth tells you whether an investment genuinely created new wealth above and beyond what monetary expansion alone would have delivered.