Investors are \u200cpouring money into U.S. health care stocks, betting that improving earnings, rising dealmaking and attractive valuations will extend the sector\u2019s rebound after years of underperformance.<\/p>\n
The renewed appetite for health care reflects a broader shift in investor positioning, with financials also seeing gains, as Wall Street\u2019s rally expands beyond the handful of AI-linked technology companies that have dominated \u2060returns for \u200bmuch of the year.<\/p>\n
The S&P 500 healthcare index has climbed 11.2 per cent in the past three months to hit a record high, outpacing the S&P 500\u2019s 6 per cent rise. Around 50 U.S.-listed healthcare funds attracted US$2.44-billion in July, according to LSEG Lipper data, extending June\u2019s nearly US$1.5-billion inflow and reversing a three-month stretch of net withdrawals.<\/p>\n
\u201cHealth care offers a rare combination of durable growth, technology-like profitability, attractive valuation and diversification benefits at a time when \u200bmany investors remain heavily concentrated in the AI theme,\u201d J.P. Morgan analysts led by Head of \u200cGlobal Markets Strategy Dubravko Lakos-Bujas said.<\/p>\n
A Bank of America survey showed global fund managers were net 32 per cent \u201coverweight\u201d on health care stocks in July, up sharply from 14 per cent in June.<\/p>\n
The surge in healthcare follows a stretch as one of the S&P 500\u2019s weakest performers in the first five months of the year, with investors now looking ahead to a sharp improvement in profitability.<\/p>\n
Earnings for S&P 500 health care companies are expected to grow in double digits from the fourth quarter \u200cof 2026 through the \u200bend of 2027, according to Tajinder Dhillon, \u200chead of earnings and equity research at LSEG.<\/p>\n
That would reverse a 16.7-per-cent earnings contraction seen in the second quarter of 2026.<\/p>\n
\u201cSentiment around the health care \u200bsector had become overly negative, and recent earnings results and management commentary have helped alleviate \u2060some of these concerns,\u201d said James Harlow, director of research at Novare Capital Management.<\/p>\n
Drugmaker AbbVie (ABBV-N<\/a>) topped second-quarter profit estimates in \u2060its most recent earnings and health insurer UnitedHealth Group (UNH-N<\/a>) beat profit expectations and raised its 2026 forecast.<\/p>\n A surge in dealmaking has also added to the sector\u2019s appeal, analysts said. M&A value \u200bin the sector has reached nearly US$284-billion this year, according to Dealogic, approaching 2025\u2019s total of US$306-billion and topping every other year since 2021.<\/p>\n A media report earlier this week suggested AstraZeneca (AZN-N<\/a>) and Bristol-Myers Squibb (BMY-N<\/a>) held talks about a possible merger, which could create one of the world\u2019s biggest pharmaceutical companies with a combined value of nearly US$400-billion.<\/p>\n Valuations remain a key point, as the sector has been widely regarded as historically cheap.<\/p>\n \u201cHealth care valuations had been depressed for a long time and so there \u2060is some opportunity for investors,\u201d said Christian Peng, head of healthcare investment banking at Citizens Bank.<\/p>\n The sector was last trading at around 18 times its 12-month forward earnings expectations, trading above its 20-year average of 15. The S&P 500 meanwhile, last had a valuation of nearly 20 times its forward earnings.<\/p>\n Still, some analysts drew parallels to the tech selloff in 2022, where a similar rotation trade soon lost charm as investors grew confident in the tech rally once more.<\/p>\n What stands out this time is the fact that the S&P 500 is at record highs, according to \u2060Mark Hackett, chief market strategist for Nationwide.<\/p>\n \u201cPeople are actively moving to some of the \u200bforgotten areas of the market and that tends to be more sustainable, particularly if they can follow through with better earnings.\u201d<\/p>\n Health care will be \u2060a key point of debate heading into the November midterm elections, but the expected impact on companies could vary.<\/p>\n If Democrats take control of the House, they would likely revive efforts to expand \u200cthe Affordable Care Act, strengthen Medicaid funding and push back against U.S. President Donald Trump\u2019s recent actions to roll back coverage mandates.<\/p>\n Such a shift could benefit \u200bhealth insurers with large Medicaid and Affordable Care Act businesses. Hospital chains could also gain from higher insured patient volumes.<\/p>\n J.P. Morgan analysts said health care equipment and services companies have historically performed well during midterm years, though they do not expect a material change in healthcare policy this year.<\/p>\n Some see a divided government in Washington as a tailwind for health care stocks.<\/p>\n \u201cIt\u2019s a net positive for the health care sector \u200bbecause it means some of the threat of earnings-pressuring legislation could potentially go away,\u201d said Eric Parnell, chief market strategist at Great Valley Advisor Group.<\/p>\n","protected":false},"excerpt":{"rendered":"Investors are \u200cpouring money into U.S. health care stocks, betting that improving earnings, rising dealmaking and attractive valuations…\n","protected":false},"author":2,"featured_media":850946,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[34],"tags":[901,888,902,879,877,903,49,48,876,895,896,891,878,875,46,549,295,894,887,914,880,881,893,84,392,889,890,884,904,885,909,910,912,907,911,905,908,882,898,899,714,897,906,865,61,900,892,886,883,913],"class_list":["post-850945","post","type-post","status-publish","format-standard","has-post-thumbnail","category-healthcare","tag-alberta","tag-arts-news","tag-bc","tag-breaking-news","tag-breaking-news-video","tag-british-columbia","tag-ca","tag-canada","tag-canada-news","tag-canada-sports","tag-canada-sports-news","tag-canada-trafficcanada-weather","tag-canadian-breaking-news","tag-canadian-news","tag-economy","tag-education","tag-environment","tag-federal-government","tag-foreign-news","tag-globe-and-mail","tag-globe-and-mail-breaking-news","tag-globe-and-mail-canada-news","tag-government","tag-health","tag-healthcare","tag-life-news","tag-lifestyle","tag-local-news","tag-manitoba","tag-national-news","tag-new-brunswick","tag-newfoundland-and-labrador","tag-northwest-territories","tag-nova-scotia","tag-nunavut","tag-ontario","tag-pei","tag-photos","tag-political-news","tag-political-opinion","tag-politics","tag-politics-news","tag-quebec","tag-sports-news","tag-technology","tag-travel","tag-trudeau","tag-us-news","tag-world-news","tag-yukon"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/850945","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=850945"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/850945\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/850946"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=850945"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=850945"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=850945"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}