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Healthcare is now the best performing sector year-to-date, up about 13%. It has been outperforming other sectors over the past few months and was also the best performing sector in Q3.
Some big money managers have reduced their positions in technology, which had run-up a lot over the past few years, and added to their positions in healthcare stocks. Healthcare sector valuations still look attractive.
Further, most healthcare giants have cash-rich balance sheets. They were able to repatriate their overseas cash thanks to tax reform, and have spent it on dividends, buybacks, and acquisitions.
Historically, healthcare has outperformed the broader market during a period of rising interest rates. It is also seen as a defensive play and many investors have poured money into this sector in view of the ongoing market volatility. Additionally, recent earnings reported by healthcare companies have been strong.
The longer-term outlook for healthcare remains positive as the sector is a direct beneficiary of the world’s rapidly aging demographic trend. Further, in many developing countries, governments are increasing their healthcare support. And in these countries, healthcare spending is rising from a very low level and has a significant potential to go up as income levels in these countries rise.
To learn more about the SPDR Health Care Select Sector ETF (XLV – Free Report) and the Vanguard Health Care ETF (VHT – Free Report), please watch the short video above.
