The Takeaway
With value having soundly outperformed growth and with the technology sector having performed poorly in the first quarter of 2025, thematic indexes highly exposed to growth stocks and the technology sector tended to perform worst.
The top three performing thematic indexes for the quarter were Healthcare Innovation, Hydrogen, and Food Innovation.
The bottom performing indexes included those targeting the Cloud Computing, Nanotechnology, and Next Gen Artificial Intelligence themes.
With volatility kicking in amid rising geopolitical tensions and heightened economic uncertainty, we witnessed a reversal of prevailing market trends in the first quarter. While technology-oriented thematic indexes performed well in 2023 and 2024, they generally underperformed global markets in the first quarter of this year. Meanwhile, more defensively oriented thematic indexes with a value bias tended to perform best.
Leveraging forward-looking insights from Morningstar equity analysts, the Morningstar Thematic Indexes are designed to deliver unparalleled thematic purity across a range of durable themes. Across the thematic index lineup, the three top-performing indexes in the first quarter focused on the Healthcare Innovation, Hydrogen, and Food Innovation themes, with each of these indexes exhibiting a modest value bias relative to the Morningstar Global Markets Index. Within this group, the Morningstar Global Healthcare Innovation Index performed best. Aside from its value bias, favorable returns stemmed from the healthcare sector outperforming the broad market and from strong stock selection within the healthcare sector. The top contributors to its favorable performance were AbbVie, Johnson & Johnson, and Roche. On the other side of the coin, the worst-performing indexes in the first quarter targeted Cloud Computing, Nanotechnology, and Next Gen Artificial Intelligence. Overall, relative to a -1.4% for the Morningstar Global Markets Index in the quarter, the Global Healthcare Innovation Index generated a +9.0% total return while the Morningstar Global Cloud Computing Index generated the lowest total return at -11.5%.
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