Healthcare Stocks Emerge as a Potential Hedge Against Tech's Weakness

In the wake of the tech industry's recent decline, Wall Street is turning its attention towards healthcare stocks as a potential source of strength.

Healthcare has outperformed the broader market this year, boosted by its growth potential and traditional value characteristics. Notably, the sector has seen strong returns in biotech, medical equipment, and insurance.

"I think the best hedge on tech is healthcare," said Nicholas Colas, co-founder of DataTrek. "Healthcare got crushed last year on a whole range of issues, but it's poised for a rebound."

Todd Sohn, ETF strategist at Strategas Asset Management, highlights the sector's underperformance relative to the S&P 500 over the past five years. However, he sees this as an opportunity, especially as tech begins to falter.

"There's been massive outflows from healthcare ETFs, which tells me investors have left the space," said Sohn. "From a contrarian perspective, I like that idea."

Sohn also notes that the negative sentiment surrounding GLP-1 weight-loss drugs has cooled, which is benefiting healthcare equipment companies.

"Those names were just totally beaten down," he said. "But the tide is turning, and you're starting to see some of these equipment ETFs really revive themselves."

For investors seeking exposure to healthcare, Sohn suggests a broad approach that includes providers, equipment manufacturers, and biotech companies.

In conclusion, healthcare stocks offer a compelling investment opportunity, combining growth potential with value characteristics. As the tech sector faces challenges, investors should consider healthcare as a potential hedge against further market volatility.