Large-cap momentum names have been pushing the healthcare sector aside. Investors have primarily been flocking to Magnificent Seven names benefiting from the artificial intelligence (AI) push. The healthcare sector, however, could be in the early stages of a comeback if the current momentum can continue to snowball.
Healthcare stocks were high flyers during the pandemic, but near the tail end of 2021, the bullishness started to fizzle. A McKinsey & Company report noted that while pharmaceutical and healthcare delivery innovations have been providing some tailwinds, much of the sector has been marred by regulatory scrutiny as well as escalating costs.
“You have got this constant overarching political and regulatory overhang that doesn’t really seem to subside with any administration,” said Jared Holz, healthcare sector strategist at Mizuho Securities, back in early August. “When you have so much nebulousness around the sector, it turns people off rather than invites them to the party.”
The market activity has been indicative of the challenges the sector has been facing as of late. Taking a look at the S&P 600 Health Care Sector; it’s trailing the broader S&P 500 by a wide margin, as well as the S&P 600.
Fast forward to today, the sector is showing signs of life, as seen in the stock performances of the biggest health care companies based on market cap. UnitedHealth Group, HCA Healthcare, and CVS Health Corp. turned towards the upside in the beginning of August. That could portend an early rally.
Of course, now the question remains: Is the rally short-lived or can the sector see more upside ahead?
A Bullish CURE for the Sector
If bullishness prevails for the health care sector, tactical traders should take a look at the Direxion Daily Healthcare Bull 3X ETF (CURE). The fund provides 300% exposure to the Health Care Select Sector Index. It offers broad coverage of the sector as opposed to taking on the concentration risk of trading individual stocks.
The index includes domestic companies from the healthcare sector, which includes the following industries: pharmaceuticals; health care equipment and supplies; health care providers and services; biotechnology; life sciences tools and services; and healthcare technology. The fund’s top three holdings include Lilly, Johnson & Johnson, and Abbvie Shares.
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