Additionally, Morgan Stanley is above neutral on healthcare stocks. However, Parker warns that there may be some selling pressure in the space after the outperforming run in the healthcare sector.
Year-to-date, the Health Care Select Sector SPDR (NYSEArca: XLV) gained 12.5%, iShares U.S. Healthcare ETF (NYSEArca: IYH) rose 13.4%, Vanguard Health Care ETF (NYSEArca: VHT) increased 14.3% and Fidelity MSCI Health Care Index ETF (NYSEArca: FHLC) advanced 13.3%.
“I’m a little bit worried that you’ll see some of the biotechs and roll-up names get sold as the rates rise. Biotech in particular has a lot more sensitivity to interest rates than maybe everyone realizes,” Parker added.
Biotech makes up a good chunk of the healthcare sector. For instance, biotechs account for 21.1% of XLV’s holdings. Moreover, the sub-sector has been among the best performing areas of the market, with the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB) up 26.3% and the SPDR S&P Biotech ETF (NYSEArca: XBI) 39.5% higher year-to-date. [Two Big Biotech ETFs]
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Max Chen contributed to this article.