Industries in trouble

In a volatile 2025, just 22 of the 73 industries in the S&P 1500 Index have managed to generate gains. Of these 22 industry indexes, only two have produced total returns higher than the S&P 1500’s 12.8% annualized over the last 10 years.

At least three of these near-term outperformers but long-term laggard industries — oil and gas, pharmaceuticals, and professional services — face significant headwinds that make us reluctant to buy into their recent success. Two other industries — airlines and automobiles — are struggling mightily this year, and we see more challenges ahead.

We explore all five industries below.

Airlines

Overseas travel to the U.S. fell 12% for the month of March, accelerating from a 2% dip in February, according to the International Trade Administration. Travelers for March slumped 17% from Western Europe, 24% from Central America, and 26% from the Caribbean. This marks the first significant drop in travel to the U.S. since early stages of the pandemic.

The decline in international travelers is linked to a range of factors, including concerns over President Trump’s policies and rhetoric. Delta Air Lines ($41; DAL) attributed the drop in ticket bookings to Trump’s tariffs and recession fears. Delta withdrew its 2025 guidance and scrapped plans to expand capacity.

The S&P 1500 passenger-airlines industry is down an average of 37% this year. The airline industry has an abysmal track record in past years with recessions, dropping 30% in 2020, 24% in 2008, and 30% in 2001. Airlines were also slow to recover, lagging in 2021, 2009, and 2002.

Automobiles

Few U.S. industries are getting hit harder by tariffs than automakers. On April 3, Trump imposed a 25% tariff on any vehicles not assembled in the U.S., prompting Canada to respond with its own 25% tariff on U.S. cars, implemented on April 9. About 46% of the 16 million vehicles sold in the U.S. last year would have been affected by these U.S. tariffs, reported CNBC.

Analysts have overwhelmingly reacted negatively to tariffs. S&P Global expects the tariffs to reduce North American auto production by 1.28 million vehicles this year and cut U.S. auto sales by 700,000 vehicles. Auto stocks were down an average of 23% this year as of April 22. 

Oil and gas

The sharp drop in foreign tourism in 2025 has begun to hurt oil demand, say J.P. Morgan Chase ($241; JPM) analysts. Not helping matters are fears of a U.S. recession and the Organization of the Petroleum Exporting Countries and allied producers’ (OPEC+) April 3 decision to ramp production. U.S. gasoline demand dropped 3% in early April, even as demand rose elsewhere in the world.

Meanwhile, U.S. oil prices are slouching toward $60 per barrel, down 12% from the end of 2024 and down 24% from 12 months ago. That’s a problem, considering oil prices need to be around $65 per barrel for new wells to be profitable, according to the Dallas Federal Reserve’s energy survey. The average oil, gas, and consumable fuels company in the S&P 1500 Index is expected to post 10% lower earnings per share this year.

Pharmaceuticals

Beset by uncertainty over tariffs and the future of Medicaid, S&P 1500 Index pharmaceutical stocks have averaged a 9% decline in the past month. Drugmakers are expected to average 11% profit growth, better than the broad index’s average growth of 5%. 

While we don’t recommend any companies in the drug group, we do rate BioMarin Pharmaceutical ($62; BMRN), a biotech firm, as a Buy. BioMarin is not immune to the pressures facing drugmakers, but it is a niche player with a small portfolio of drugs in promising areas. Analysts expect profit growth of 22% this year. 

Drugmakers also face a looming cliff of expiring patents. More than $400 billion in drugmaker revenue is at risk as patents expire between 2025 and 2033, according to Stat+, an industry publication. The last major patent cliff occurred in 2011, when $250 billion in sales was at risk.

Professional services

Services in areas like employment, outsourcing, consulting, and education appear highly vulnerable to artificial intelligence. These industries could undergo a shakeout, as some companies implement AI to boost results, while others fall by the wayside.