“In 2018, the FDA approved 59 novel drugs, exceeding last year’s record for the second consecutive year,” said State Street. “A record number of FDA novel drug approvals over the past two years is likely to fuel sales for new drugs in coming years. In addition, with an aging population driving demand for more medical services and products, US national health spending is projected to grow at a faster rate than normal GDP growth between 2017 and 2026 and more rapidly than the 2008–2016 period, benefiting the sector on a broad basis.”
Along with possessing defensive traits, the healthcare sector also sports quality characteristics, an investment style that is currently receiving renewed attention.
“Lastly, the Health Care sector also tends to have higher return to equity and stronger balance sheet than the broader equity market, exemplified by high free-cash-flow-to-debt and low debt-to-EBITDA ratios,” according to State Street. “In a late cycle environment with financial conditions becoming tighter and economic growth decelerating, Health Care’s high-quality balance sheet may better position portfolios to navigate a downhill climb.”
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