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Health Care: A Sector Outperformer, But I’m Not Buying

The markets recent volatility has shifted investor focus into defensive positions, and as a defensive play, the health care sector has benefited. Health care has beaten all other sectors with a year-to-date gain of 15.3% (the second best performer being utilities, up 11% year-to-date…and the worst being financials, with a .3% gain).

And health care ETFs have outperformed other sector funds. According to Standard & Poor’s, “among the top year-to-date ETF performers, we see a heavy concentration in health care”, with 14 of the 16 strongest ETFs focused on the over-all sector.

The Health Care Select Sector SPDR (XLV), the largest sector fund with over $4 billion in assets, is up 14% year-to-date (and up over 28% in the past year). The fund holds the 52 health care companies in the S&P 500 (something like 90% of holdings had upside surprises in the recent earnings season). The fund is in a long-term positive trend, and has, technically, been a long-term buy since last September…but I’m not a long-term buyer.

My concerns: the fund is moving towards an overbought range (at which point we could see a correction). And again, the sectors recent gains have, in part, been driven by a focus on defensive positions. When we see risk return to the table, defensive stocks will have less appeal.

Navigating the Pitfalls of Annuity Investments

At Rezny Wealth Management, we prioritize transparency, education, and the long-term financial well-being of our clients. One area where we differ from many other financial firms is our approach to an

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