The March Sell-off Wasn’t Just About Tech

Dear Reader,

If you only followed the headlines in March, you’d probably walk away thinking technology stocks took the worst beating on the board. That’s understandable.

Big Tech still dominates financial media, and when the largest names in the market wobble, it feels like the whole story. But that wasn’t the full story in March.

Tech did fall, yes, but it actually held up better than several other major sectors that got hit even harder.

The March Sell-off Wasn’t Just About Tech

Industrials dropped 8.44% in March, consumer staples fell 8.42%, real estate slid 6.20%, and communication services lost 5.78%, while technology declined 4.07%.

The S&P 500 itself fell 4.98%, which means tech was weak but not among the worst casualties of the month.

But a lot of investors are still reacting to the market they saw on TV instead of the market that actually traded.

March’s pain wasn’t confined to semiconductors, software, and mega-cap growth.

The fact of the matter is that this sell-off spread well beyond Silicon Valley and into steadier, more defensive, and more cyclical parts of the market.

It was a broader risk-off move driven by inflation worries, rising energy costs, geopolitical stress tied to the Iran war, and renewed concern about growth.

When Weakness Is a Strength

One reason tech held up better than many people expected is that a lot of the damage had already been done before March really got underway.

As of March 31, the Technology Select Sector SPDR ETF, XLK, was down 7.52% year to date.

That means tech entered March already under pressure, unlike some other sectors that came into the month with gains to lose.

Industrials, for example, were still up 4.59% year to date even after their March decline.

Consumer staples were up 6.10% year to date. Real estate was still positive at 1.90%.

Communication services, despite a weak March, was down 5.48% year to date, still a smaller year-to-date hit than tech.

That helps explain the disconnect between perception and performance…

Investors were already primed to see tech as the problem child because many of the biggest technology names had been struggling for weeks and the “Magnificent Seven” were a major part of the early first-quarter turmoil.

So when March turned ugly, the media spotlight naturally stayed on the same names.

But the actual monthly losses show that other areas of the market took a harder punch. Tech may have been the loudest story, but it wasn’t the deepest cut.

And that doesn’t mean investors should ignore tech. Far from it.

There are still plenty of attractive opportunities there, especially if you believe artificial intelligence, semiconductors, and digital infrastructure remain long-term winners.

XLK itself is still dominated by major tech franchises like Nvidia, Apple, Microsoft, Broadcom, Micron, and AMD, and nearly 44% of the fund is concentrated in semiconductors and semiconductor equipment.

That’s a powerful long-term setup if you think this bull market ultimately resumes under the leadership of AI and infrastructure spending.

Where a Faster Rebound Could Show Up

But if your view is that the market may already have seen the worst of this pullback, at least for now, then the cleaner rebound trade may not be in the sector everyone has been staring at.

It may be in the sectors that actually got hit harder in March and are now flying under the radar.

That’s especially true if the next phase of this market is defined less by speculative momentum and more by sticky inflation, selective economic resilience, reshoring, infrastructure spending, and a search for durable cash flows.

In that kind of environment, industrials, staples, and real estate start to look a lot more interesting.

Communication services is close behind, especially for investors who want a blend of digital advertising, media, and entertainment exposure without going all-in on pure tech.

Industrials Benefit From a Concrete Economy

If you want exposure to the sector that sold off the most in March, the most straightforward ETF is XLI, the Industrial Select Sector SPDR Fund.

Its mandate is simple: Give investors targeted exposure to the industrial slice of the S&P 500, including aerospace and defense, machinery, transportation, electrical equipment, engineering, and related businesses.

Its top holdings include Caterpillar, GE Aerospace, RTX, GE Vernova, Boeing, Deere, Eaton, Uber, Union Pacific, and Honeywell.

Industry-wise, the fund is heaviest in aerospace and defense at 25.88%, machinery at 20.97%, and electrical equipment at 13.68%, with additional exposure to transportation and building products.

That mix makes XLI compelling for the kind of market we may be entering…

If inflation stays sticky, if defense spending remains elevated, if domestic build-outs keep moving forward, and if companies continue reshoring supply chains and spending on infrastructure, industrial businesses should remain central to that story.

March’s 8.44% drop may have been severe, but for investors looking for a catch-up trade in a sector with real economic substance behind it, industrials look like one of the strongest places to start.

Staples Aren’t Exciting, but They Don’t Need to Be

Consumer staples were another surprise victim in March, falling 8.42%, almost identical to industrials.

For investors looking to play a rebound there, XLP, the Consumer Staples Select Sector SPDR Fund, is the go-to vehicle.

Its purpose is to provide focused exposure to businesses involved in consumer staples distribution and retail, household products, food products, beverages, tobacco, and personal care.

Its largest positions include Walmart, Costco, Procter & Gamble, Coca-Cola, Philip Morris, Mondelez, Altria, PepsiCo, Colgate-Palmolive, and Target.

The fund’s biggest industry buckets are consumer staples distribution and retail at 34.69%, beverages at 19.07%, food products at 16.86%, and household products at 16.04%.

This isn’t the kind of sector that usually gets investors pounding the table in excitement, but that’s also the point…

Staples tend to matter more when the economy gets murkier, inflation pinches household budgets, and investors start paying up for resilience instead of pure growth.

These companies sell products people keep buying whether the economy is booming or limping along.

So if the next few months bring slower growth, higher input costs, or more volatility, staples could look a lot better than they did during March’s broad liquidation.

Real Estate Still Deserves a Look

Real estate may seem like an odd choice if inflation remains sticky, but it’s worth remembering that not all real estate exposure is the same.

XLRE, the Real Estate Select Sector SPDR Fund, isn’t a random basket of shaky office buildings. It tracks the real estate portion of the S&P 500 and excludes mortgage REITs.

Its top holdings include Welltower, Prologis, Equinix, American Tower, Digital Realty Trust, Simon Property Group, CBRE, Ventas, Realty Income, and Public Storage.

More importantly, its largest industry exposures are specialized REITs at 40.52%, health care REITs at 16.61%, retail REITs at 12.96%, residential REITs at 12.21%, and industrial REITs at 9.12%.

That composition gives XLRE exposure to some of the more durable corners of property markets, including data centers, cell towers, logistics properties, health care facilities, and storage.

In other words, this is not just a bet on suburban office demand magically roaring back.

It’s a more nuanced way to position for income-producing real assets tied to infrastructure, digital connectivity, housing, and aging demographics.

And after a 6.20% March drop, that setup could appeal to investors who think the worst of the panic is over and want to own hard assets with cash flow.

Communication Services Is the Quiet Wild Card

If you want a close fourth choice, XLC deserves attention…

The Communication Services Select Sector SPDR Fund fell 5.78% in March, also worse than technology, and it offers a different kind of rebound profile.

Its mission is to provide focused exposure to communication services businesses in the S&P 500, spanning telecom, media, entertainment, and interactive media.

Its top holdings include Meta Platforms, Alphabet’s two share classes, Live Nation, Netflix, Disney, Take-Two, EchoStar, Omnicom, and Warner Bros. Discovery.

On the industry side, it leans most heavily toward entertainment at 30.52%, interactive media and services at 28.90%, and media at 24.30%, with the balance in telecom.

That makes XLC an interesting bridge between old media, digital advertising, streaming, telecom, and platform businesses.

It’s not as pure a growth bet as tech, and it’s not as defensive as staples, but it does offer exposure to businesses that can rebound sharply when risk appetite improves.

If the market starts rewarding ad spending, consumer engagement, and platform economics again, communication services could surprise people the same way its March underperformance surprised them on the way down.

Don’t Follow the Loudest Narrative

The real lesson from March is that investors shouldn’t confuse the most discussed sector with the most damaged one.

Tech made the headlines, but industrials and staples were hit harder. Real estate and communication services also fell more.

Meanwhile, tech had already been weaker heading into the month, which likely softened the incremental damage once the broader market sell-off accelerated.

That’s why investors looking for rebound candidates may want to widen their field of vision beyond the usual suspects.

There are still good reasons to like technology over the long run.

But if you think the market is beginning to move through its worst fears, or at least pause them, some of the more interesting short-term rebound setups may live in the sectors that got hit hardest without getting nearly as much airtime.

That’s where perception and reality can diverge, and where opportunity often starts.

So stay bold while the rest of the market is fearful. That’s rarely comfortable, but it’s where the biggest fortunes are born.

And if you want to keep getting smarter about the markets, investing, and the sectors and stocks that deserve your attention before the crowd catches on, keep coming back to Wealth Daily every day.

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