Health is Wealth: A look at the Healthcare Sector

Health Care as a Defense 

Against the backdrop of a market environment that has seen sizable drawdowns, the performance of the healthcare sector has proven to be a haven sector for investors. As mega-cap stocks, particularly Big Tech have begun to wane – healthcare equities have exhibited strong defensive capabilities. This attribute has been consistently observed over varying market cycles, as during some of the harshest market downturns, the healthcare sector has performed comparatively well. 

While cyclical sectors, such as information technology and consumer discretionary experience slowdowns during recessionary periods, mature and stable healthcare businesses are potentially positioned to hedge against rising inflation, increasing interest rates, and slowing economic growth. Due to long-term social growth trends, such as aging demographics (i.e., a growing elderly population) and increasing healthcare spending by governments globally – the importance of the healthcare sector and the ecosystem around it makes it a foundational investment segment now, and in the years to come.    

Health Care, a wealth builder

The healthcare sector has proven to be a source of wealth generation, as over the past decade, it has materially outperformed the S&P 500 Index. As mentioned earlier, given the diverse opportunities present within the industry, investors are able to participate in the growth of new companies or benefit from the cash generation of established players, with a strong product and/or service line-up. 

For investors seeking to access the healthcare space, there are numerous options for them to gain holistic exposure or to target a specific segment of the industry. As previously noted, XLV: Health Care Select Sector SPDR® ETF provides investors with broad exposure to healthcare stocks within the S&P 500 Index. IBB: iShares Biotechnology ETF allows investors to invest in U.S. companies in the biotechnology industry, while IHE: iShares U.S. Pharmaceuticals ETF provides access to the full pharmaceutical landscape. For investors seeking exposure to smaller healthcare companies poised for growth, the PSCH: Invesco S&P SmallCap Health Care ETF is a solution worth considering.  

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decisions.