Why Boring, Dividend-Paying Consumer Staples and Industrials Stocks Are Outperforming Big Tech in 2025

The stock market in 2025 is witnessing a seismic shift. For years, the "Magnificent Seven" (Mag Seven) dominated headlines and portfolios, but their grip on the S&P 500 is loosening. While Microsoft and NVIDIA still deliver double-digit returns, Tesla, Apple, and Alphabet have faltered, with the latter two posting double-digit declines in the first half of the year [1]. Meanwhile, dividend-paying consumer staples and industrials—once dismissed as unexciting—have emerged as unexpected heroes. These sectors, led by companies like Tractor Supply, Domino’s Pizza, and Old Dominion Freight Line, are outperforming the tech giants, driven by earnings stability, low volatility, and a growing appetite for "sleep-at-night" stocks.

The Case for Consumer Staples and Industrials

The rotation into value sectors is not a fluke. Consumer staples returned 6.4% year-to-date in 2025, while industrials surged 12%, fueled by infrastructure spending and resilient demand for essential goods [1]. This outperformance contrasts sharply with the Mag Seven’s mixed results, which accounted for 79% of the S&P 500’s total return but left investors exposed to the sector’s volatility [1]. The shift reflects a broader recalibration of risk management strategies. As the Federal Reserve adopts a cautious approach to rate cuts and trade tensions persist, investors are prioritizing stability over speculative growth [3].

Take Tractor Supply (TSCO), a bellwether for the consumer staples sector. Despite a 5% post-earnings stock drop in Q2 2025, the company reported 4.5% year-over-year revenue growth and maintained its fiscal 2025 guidance, even as it navigated rising costs and a late spring season [5]. Its "Life Out Here" strategy and "ONETractor" plan have fortified its market position, with shares outperforming both the S&P 500 and gold over the past decade [5]. Similarly, Domino’s Pizza (DPZ) defied expectations, reporting a 21% year-over-year earnings-per-share increase in Q2 2025, driven by international expansion and value-driven menu innovations [6]. These results underscore the sector’s ability to thrive in uncertain environments.

Industrials: Resilience Amid Downturns

The industrials sector, often overlooked in favor of tech darlings, has also gained traction. Old Dominion Freight Line (ODFL), a key player in the logistics industry, exemplifies this trend. Despite a 6.1% revenue decline in Q2 2025 due to softer freight demand, the company maintained pricing discipline, achieving a 5.3% increase in LTL revenue per hundredweight [4]. ODFL’s strategic reinvestment in technology and fleet modernization, coupled with a 284% dividend growth since 2017, has made it a compelling long-term play [5]. Analysts remain cautiously optimistic, with a mean price target of $159.64—6.1% above its current price—reflecting confidence in its ability to outperform during economic recovery [4].

Investor Demand and Risk Management

The appeal of these "boring" stocks lies in their defensive characteristics. Barron’s has highlighted consumer staples and industrials as "sleep-at-night" investments, noting their low volatility and attractive dividend yields [2]. Apollo Global Management’s chief economist, Torsten Sløk, has echoed this sentiment, positioning Tractor Supply and Domino’s as long-term outperformers in a risk-averse market [5]. This demand is further supported by macroeconomic trends: the MSCI EAFE index surged 11% in 2025, signaling a global shift toward diversified, economically sensitive sectors [3].

The Mag Seven’s waning dominance is also tied to stretched valuations. While their fundamentals remain strong, earnings growth is slowing, and their market influence has eroded as capital flows into sectors with more predictable cash flows [4]. For instance, the Consumer Staples Select Sector SPDR underperformed the S&P 500 in 2025, but its 6.3% return pales in comparison to the 11% gain of the broader index, suggesting undervaluation [2]. This gap is narrowing as investors reallocate to sectors with stronger earnings breadth and lower volatility.

Conclusion

The 2025 market rotation is not a temporary fad but a recalibration of priorities. As trade tensions, interest rate uncertainty, and AI-driven sector shifts reshape the landscape, investors are turning to dividend-paying consumer staples and industrials for stability. Companies like Tractor Supply, Domino’s, and Old Dominion Freight Line are proving that "boring" can be better than "fancy," delivering consistent returns and defensive resilience in a world where the Mag Seven’s once-unstoppable momentum is faltering. For risk-conscious investors, this shift offers a compelling playbook: diversify, prioritize earnings stability, and embrace the quiet power of value investing.

Source:
[1] H1 2025 equity recap: Business as unusual, [https://www.rbcwealthmanagement.com/en-asia/insights/h1-2025-equity-recap-business-as-unusual]
[2] 12 Cheap Consumer Stocks for a Rocky Market, [https://www.barrons.com/articles/consumer-stocks-defense-market-66ca6b35]
[3] The 2025 Stock Market Rotation: What it Means for Investors, [https://www.finsyn.com/the-2025-stock-market-rotation-what-it-means-for-investors]
[4] Old Dominion's Q2 Earnings and Stock Decline Amid ... [https://www.ainvest.com/news/dominion-q2-earnings-stock-decline-freight-downturn-assessing-strategic-resilience-long-term-2507/]
[5] If You Invested $1000 in Tractor Supply a Decade Ago, This is ... [https://finance.yahoo.com/news/invested-1000-tractor-supply-decade-123002556.html]
[6] Domino's Pizza Beat on Earnings. International Markets ... [https://www.barrons.com/articles/dominos-pizza-stock-earnings-dpz-a02697ad]