In 2023 and 2024, the stock market is set for two consecutive years of large increases, particularly the performance of Technology giants is remarkable. However, after experiencing strong gains on Wall Street over the past two years, many believe it is time to adopt a more cautious approach.

According to Glenmede Investment Management's portfolio manager Alex Atanasiu, after the S&P 500 Index has increased more than 20% for two consecutive years, the average ROI for the following year is only 6.7%. Although the 'Seven Giants' stocks may not plummet significantly, investors might consider incorporating more defensive stocks, such as Medical Care and Consumer Essentials, into their portfolios.

Bill Stone, Chief Investment Officer at Glenview Trust, wrote in a report, 'In 2025, it may be a wise choice to appropriately allocate some underperforming defensive stocks, such as Consumer Essentials and Medical Care sectors, as opportunities may arise in the 'ruins' of Medical Care and Consumer Essentials.'

The performance of the Consumer Essentials sector is clearly not optimistic. Despite the soaring stock prices of retail giants Costco (COST.O) and Walmart (WMT.N), the Consumer Staples Select SPDR ETF (ticker: XLP) saw a mere 9% increase in 2024, lagging behind the Large Cap market. Other essential stocks, such as Coca-Cola (KO.N), Pepsi (PEP.O), Mondelez International (MDLZ.O), and Target (TGT.N), performed even worse, potentially making them attractive.

The Medical Care sector performed even worse. The Health Care Select SPDR ETF (ticker: XLV) was nearly flat in 2024. Despite the surge of Eli Lilly and Co (LLY.N), it was not enough to offset the declines of UnitedHealth (UNH.N) and pharmaceutical companies like Merck (MRK.N) and Johnson & Johnson (JNJ.N). Concerns about regulators possibly increasing pressure on Insurance companies and the potential impact on pharmaceutical companies if anti-vaccine activist Robert F. Kennedy Jr. is appointed as Secretary of Health and Human Services, also weighed down the sector.

However, these concerns may be exaggerated. The PE ratios of the Medical Care and Consumer Essentials sector ETFs are 16.5 times and 18.5 times, respectively, which is below their five-year highs and there is a greater discount compared to the nearly 22 times PE ratio of the S&P 500 Index, indicating remaining upside potential, especially in the Medical Care sector.

Jason Goepfert, Chief Research Analyst at SentimenTrader, pointed out that the sell-off in the Medical Care sector is too extreme and a rebound is likely this year. He stated, 'When many component stocks of an index perform particularly well or poorly, we usually see the index exhibit reverse fluctuations.' He also added that there is enough reliability to...technical indicatorsThis indicates that the "good days" for this sluggish sector are about to arrive.

Investors may gradually realize the significant disparity between fundamentals and valuations. Wall Street's consensus Target Price for Moderna (MRNA.O) indicates that the company's stock has nearly 75% upside potential, while the potential gains for Biogen (BIIB.O) and Regeneron Pharmaceuticals (REGN.O) are also over 50%.

In addition, Consumer staples and Medical Care Stocks also provide a higher dividend yield. If the Federal Reserve continues to lower short-term interest rates in 2025, it will undoubtedly be Bullish for these Sectors. Bank of America Chief Investment Officer Eric Freedman stated in a report: "Defensive and income-oriented Sectors will continue to respond positively to the Fed's easing policies."

Therefore, do not be surprised if the market may expand from Technology and Other momentum stocks to these relatively calm value sectors in 2025.