Sector Performance Heatmap
Average Sector Returns After Events
Immediate Winners (First Week)
Energy (XLE)+2.0%
Healthcare (XLV)+1.7%
Utilities (XLU)+1.3%
Energy and defense stocks consistently outperform in the first week after
geopolitical events. Gold also benefits from flight-to-safety flows.
Immediate Losers (First Week)
Financials (XLF)-0.2%
Consumer Discretionary (XLY)+0.3%
Communication Services (XLC)+0.4%
Consumer Discretionary and Real Estate tend to underperform as
consumer confidence drops and interest rate uncertainty rises.
Defense Stocks: The Consistent Winner
Average 1W Return (LMT, RTX, NOC, GD, BA composite)
+1.8%
Average 1M Return
+3.3%
Average 3M Return
+1.1%
Defense stocks benefit from two tailwinds: (1) immediate repricing on expected contract
acceleration and munitions demand, and (2) medium-term benefit from defense budget
increases that follow geopolitical crises. The effect is strongest in the first 3 months
and fades as the crisis normalizes.
Medium-Term Rotation (1-3 Months)
Historical pattern shows a predictable rotation: after the initial shock, capital flows
back into growth and technology sectors as the market recognizes that the economic impact
is contained. Energy stocks tend to give back gains as oil prices normalize
(unless there is a sustained supply disruption).
The 3-month crossover. In most events, Technology (XLK) outperforms
Energy (XLE) on a 6-month basis even when Energy led in the first week. The exception
is sustained oil disruptions (1973, 2022) where Energy maintains leadership.
Modern Sector Mapping: AI, SaaS, and Enterprise Software
AI infrastructure (NVDA, AMD, data centers) and enterprise SaaS (CRM, ADBE, MSFT)
did not exist as categories during most historical events. Extrapolating from the
Technology sector (XLK) pattern:
- AI/Cloud Infrastructure: Slight negative in week 1 (risk-off),
but structural demand is unaffected. AI capex plans from hyperscalers
(MSFT, GOOG, AMZN) are not sensitive to Middle East geopolitics.
- Enterprise SaaS: Subscription revenue is sticky. CRM, ADBE
contracts don't get cancelled because of a military strike. Expect a 1-3% dip
on the initial shock, full recovery within 1 month.
- GovTech / Defense-adjacent: MSFT Azure GovCloud, CRM GovCloud,
Palantir. These benefit from defense spending increases. Neutral to positive.
- Cybersecurity: Direct beneficiary. State-sponsored cyberattacks
escalate during conflicts. PANW, CRWD, FTNT see accelerated pipeline.