Top 10 Things You Need to Know:
- Healthcare is often seen as a defensive sector due to its constant demand and some insulation from the economy.
- Despite this, the sector is down nearly 2% for the year, while the S&P 500 index has gained over 17%.
- The latest week saw investors pull a net $1.4 billion from the sector, marking the most significant weekly outflow since May 2022.
- Notwithstanding, the healthcare sector has seen the third largest inflows of any sector year to date.
- Some investors are bullish on healthcare stocks, thinking that the Federal Reserve’s interest rate hikes will impact the economy.
- Other investors are less pessimistic as the economy has been resilient and shows few signs of weakening.
- The Atlanta Federal Reserve’s GDPNow forecast model showed the economy likely growing at a 5.6% annualized rate in Q3, but this estimate may drop as more data comes in.
- Political and regulatory risks are also considerations, with President Joe Biden’s administration releasing a list of 10 prescription medicines subject to price negotiations.
- Earnings in the healthcare sector are expected to lag in 2023 due to a decline in COVID-related revenues.
- Margie Patel, a senior portfolio manager at Allspring Global Investments, thinks healthcare stocks will remain sluggish until the unemployment rate rises.
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[Source: Reuters, September 5th, 2023]