4 Worst Sectors To Invest In This Year, According to Experts
- - 4 Worst Sectors To Invest In This Year, According to Experts
Vance CariagaFebruary 2, 2026 at 10:40 PM
0
mysticenergy / Getty Images/iStockphoto
What are the worst sectors to invest in this year? A lot depends on macro trends ranging such as the economy and sociopolitical environment.
The stock markets did very well in 2025 following a rocky start to the year, with the S&P 500, Nasdaq and Dow all posting year-to-date gains of 13% or higher as of Dec. 23.That doesn’t mean all stocks have done well, however — or all economic sectors. Some sectors have lagged well behind the broader stock markets and could be poised for even more pain in 2026.
The Fed Rate Will Determine a Lot
One of the biggest issues to keep an eye on in 2026 is Federal Reserve monetary policy, according to Dr. Robert Johnson, CFA, chairman and CEO at Economic Index Associates, professor of finance at Creighton University and co-author of “The Tools & Techniques of Investment.”
“The expectation is that in 2026 the Fed will pursue a more dovish interest rate policy when a new Fed chairman is appointed,” he told GOBankingRates. Such a policy will help some sectors and hurt others.
Read Next: Mark Cuban: Trump’s Tariffs Will Affect This Class of People the Most
For You: How Middle-Class Earners Are Quietly Becoming Millionaires — and How You Can, Too
Real Estate
Real estate is the “standout” when it comes to the worst sectors right now, according to George Kailas, CEO of Prospero.ai, a hedge fund-level AI research desk for investors that analyzes stocks based on short- and long-term signals, upside and downside breakouts, growth, profitability and other factors.
Real estate stocks got an average score of only 30 out of 100 in terms of the “most important” signal upsides. One of the main challenges facing the sectors is a “massive” refinancing wall, Kailas said.
“Over $1.5 trillion to $2 trillion in commercial mortgages mature through 2026-27, forcing refinancing at much higher rates and crushing free cash flow,” he told GBR. “Balance sheets are under stress. Short-term, low-rate, interest-only structures from the 2010s now reset higher, raising default risk, dividend cuts, and dilutive equity issuance, which drives poor equity performance.”
Kailas also pointed to “weak asset fundamentals” in terms of elevated vacancies and “tepid” demand in the office market as well as some lodging markets.
Banking/Finance
Financial stocks were listed by Johnson among those that tend not to do well in a falling interest rate environment. That view is backed up by other sources.
When interest rates fall, bank profitability “tends to be challenged, especially over the medium to long term,” BusinessWest.com reported. “The rates banks earn on new and existing variable-rate assets fall faster than the rates they can cut on deposits, squeezing net interest margins.”
This can have a negative impact on banking/finance equities as well.
“A shrinking gap between what banks pay on deposits and charge on loans can hurt bank stocks,” Charles Schwab noted in a blog.
Energy
Energy stocks have an average score of 46/100 in Prospero.ai’s signal upside ranking and also show weakness in profitability forecasts.
One problem right now is “structural oversupply,” Kailas said. He pointed to forecasts showing that global oil markets are moving into a surplus of multi-million barrels per day.
In addition, price ceiling pressure could send Brent crude prices much lower by late 2026, thus “limiting cash flow growth and leaving less room for buybacks and dividends to support share prices.”
Consumer Cyclical
Also known as “consumer discretionary,” this sector could get hit by “slowing consumer momentum,” according to Kailas.
“Surveys and spending data point to pullbacks in discretionary and semi-discretionary categories as wage growth slows and consumers feel ‘silent pain,'” he said. “Many households are drawing down savings and leaning more on credit cards, which constrains future big-ticket and experiential spending that drives sector earnings.”
More From GOBankingRates
12 Costco Deals for 2026 To Grab as Soon as Possible
What Is a Good Side Gig Income for 2026?
5 Clever Ways Retirees Are Earning Up to $1K Per Month From Home
9 Low-Effort Ways to Make Passive Income (You Can Start This Week)
This article originally appeared on GOBankingRates.com: 4 Worst Sectors To Invest In This Year, According to Experts
Source: “AOL Money”
