The biotech exposure can be problematic for health care ETFs in risk-off environments and that much has recently been on display. As stocks have weakened in recent weeks, XLU has now taken the top spot among the nine SPDRs from XLV on a year-to-date basis. Since the start of the fourth quarter, XLV has lagged both XLP and XLU.

Still, the exposure to old school pharmaceuticals stocks is important for XLV. With the recent retrenchment in the Dow, just nine of the index’s 30 components are up at least 10% this year. Two are J&J and Merck, a combined 18.9% of XLV’s weight.

McGrath notes the XLV is coming into a period of seasonal strength with November and December being two of the best months in terms of average performance for the largest health care ETF.

Health Care Select Sector SPDR