At the first half’s closing low on April 8, the S&P 500 was down 15% year-to-date. At its closing high last Friday, the index was up 5% YTD. Over the past month, through last Friday, the Industrials sector was up nearly 12%, leading the S&P 500 sectors.

Industrials

The best-performing sector of the S&P 500 year-to-date is industrials, and Wells Fargo expects the corner of the market to continue its outperformance.

Specifically within industrials, Tracie McMillion, the bank's head of global asset allocation strategy, likes aerospace and defense companies.

"Aerospace and defense are areas where we think there could actually be a benefit to geopolitical uncertainties," McMillion said.

These companies tend to have low exposure to tariffs and economic growth concerns. Exposure to these companies can help investors hedge geopolitical risk from not only the trade war but also regional conflicts in Eastern Europe and the Middle East.

It's a trade that's worked so far, as the software company Palantir is one of the market's best-performing stocks, having risen 76% this year in large part due to its lucrative government defense contracts.

Financials

Investors might be wishing for rate cuts, but in the meantime, the financials sector is benefitting from elevated borrowing costs. Financials have been a classic beneficiary of the Trump trade, as the president has been pro-deregulation.

Sameer Samana, senior global market strategist, pointed to a steepening yield curve and robust loan growth as tailwinds for banks.

Wells Fargo is bullish on the transactions and payment processing subsector, as these companies have high margins and cash flow generation.

Energy and utilities

McMillion recommends reducing exposure to cyclical consumer discretionary stocks and favoring more defensive, domestic-oriented sectors such as energy and utilities. These companies can also provide a hedge against inflation thanks to their ties to real assets like oil.

Midstream energy, electric utilities, and renewable energy companies "operate some of the most difficult-to-replicate assets on the planet, including interstate pipelines and nuclear power plants," giving them a competitive advantage, the bank wrote in its midyear outlook report.

Utilities companies are also positioned to benefit from increased energy demand from AI technologies and data centers, the bank said.

Technology

Technology continues to be a stock market winner. Wells Fargo likes the information technology and communication services sectors for their high-quality companies and pricing power.

"We would continue to focus on large caps and mid-caps," Cronk said. "We think they have enough scale to try and pass along pricing with respect to tariffs, and they have better balance sheets."

Big Tech dominates the ranks of the market's largest companies, making them a safe choice for investors looking to seek refuge in US large cap equities.

"Those should be candidates for purchase on any pullbacks in the markets," McMillion said of those sectors.