The healthcare sector was one of the best-performing sectors in the S&P 500 last year. Investors looking for more of the same this year can consider an array of exchange traded funds dedicated to the sector, including the Vanguard Health Care ETF (NYSEArca: VHT).
VHT allocates about two-thirds of its combined weight to pharmaceuticals and biotechnology stocks. There are other catalysts to consider, including that the U.S. economy is moving into the late-cycle phase, overall growth may slow and signs of an economic slowdown could pop up. Consequently, investors may also turn to defensive sectors that are less economically sensitive, such as healthcare.
VHT tracks the MSCI US Investable Market Health Care 25/50 Index and holds 374 stocks, meaning the ETF features exposure to mid- and small-cap names as well as large-caps.
“Although that broad mandate seems like it would provide enough diversification to allow its managers to steer clear of dangers while maximizing opportunities, 2017 didn’t provide very secure footing,” according to InvestorPlace. “The defeat of Obamacare (aka, the Affordable Care Act) was a top priority from inauguration day forward, and the jockeying over what was or wasn’t in the new legislation was constantly shifting.”
Industry observers argue that medical technology companies can tap into increased healthcare spending among emerging economies while the U.S. market has matured and could experience slower growth. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020.