Healthcare Emerges as a Haven Amid Tech's Woes
As the tech sector falters, investors are seeking refuge in healthcare stocks. Despite underperforming in 2024, healthcare has had a strong start in 2025, ranking among the top-performing large-cap sectors with a 6% gain.
Tech's Fall Creates Opportunity for Healthcare
"Healthcare is the best hedge on tech," said Nicholas Colas of DataTrek. While tech has dominated the past few years, healthcare has suffered from various issues, including policy changes and fundamental challenges.
Healthcare's Lagging Performance
Todd Sohn of Strategas Asset Management highlights healthcare's lackluster returns compared to the S&P 500 over the past five years. Despite this underperformance, Sohn believes healthcare is attractive due to its contrarian appeal.
Healthcare ETFs See Outflows
ETF assets in healthcare have declined by over $10 billion since the October 2023 market bottom, indicating investor departures. Sohn views this outflow as a positive sign, suggesting that healthcare may be poised for a rebound.
Healthcare's Growth and Value
Sohn emphasizes healthcare's growth potential, which complements its traditional value characteristics. This combination offers investors multiple ways to participate in healthcare's recovery, including investments in biotech, medical equipment, and insurers.
GLP-1 Risk Factor Waning
GLP-1 weight-loss drugs initially posed a headwind for healthcare equipment companies. However, investors are now recognizing that the drug's downstream effects will take time to materialize. Sohn believes this realization is driving a resurgence in healthcare equipment ETFs.
Diversify with Healthcare
For investors seeking alternatives to tech, Sohn recommends broad healthcare exposure to gain access to providers, equipment manufacturers, and biotech companies. Colas echoes this sentiment, stating that healthcare presents a compelling investment opportunity.