The Takeaway
Best-Performing Themes: Nanotechnology, Healthcare Innovation, Brain Health Innovation.
Worst-Performing Themes: Metaverse and Virtual Interaction, Sports Betting and iGaming, Remote Work and Lifestyle.
With the momentum of AI stocks having paused, Healthcare themes stole the limelight in the fourth quarter.
The Morningstar Global Markets Index posted a solid 3.4% total return in the fourth quarter, with the Healthcare and Basic Materials sectors performing best. The Real Estate and Consumer Cyclical sectors brought up the rear, as the only two sectors that delivered a negative total return.
Leveraging forward-looking insights from Morningstar equity analysts, Morningstar Thematic Indexes are designed to deliver unparalleled thematic purity across a range of durable themes. Across Morningstar's thematic index lineup, the three top-performing indexes in the fourth quarter focused on the Nanotechnology, Healthcare Innovation, and Brain Health Innovation themes. Within this group, the Morningstar Global Nanotechnology Index performed best, delivering an impressive 18.2% total return and outperforming the Morningstar Global Markets Index by 14.9%.
Meanwhile, the three worst-performing thematic indexes harnessed the Metaverse & Virtual Interaction, Sports Betting & iGaming, and Remote Work & Lifestyle themes. Within this group, the Morningstar Global Metaverse & Virtual Interaction Select Index performed worst, generating a disappointing -13.2% total return and underperforming the Morningstar Global Markets Index by 16.5%.
At long last, the strong momentum of many leading AI stocks took a pause in the quarter as Alphabet stole the limelight with its Gemini 3 model release and the growing success of its TPU chips. As a result, the Technology sector delivered a below-market return of 2.6% and other sectors had a chance to shine. However, despite the middling performance of the Technology sector more broadly, semiconductor stocks were a pocket of strong performance. This allowed the Nanotechnology theme to emerge as the best overall performer while returns of the Morningstar Global Next Generation Artificial Intelligence Index were more closely in line with the broader market.
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