Exchange traded fund investors may be gearing up for a turnaround in the healthcare sector.

Healthcare stocks have been underperforming. The Health Care Select Sector SPDR ETF (NYSEArca: XLV) has gained 13.9% year-to-date while the S&P 500 has increased 17.1%.

However, XLV was the most popular ETF play over the past week, attracting almost $1.5 billion in net inflows, according to ETFdb.

ETF investors could be stocking up on healthcare exposure as the health sector begins to roll out a potential strong second quarter earnings season.

To kick things off, insurance giant and industry bellwether UnitedHealth Group’s (UNH) second quarter results revealed that pandemic-driven disruptions have weighed on the healthcare sector. Yet these pandemic-induced disruptions could becoming to an end.

UnitedHealth’s medical-loss ratio, a measure of the proportion of premiums paid out for medical care, increased to about 83% because of the return toward normal levels of healthcare use, the Wall Street Journal reports. In comparison, the medical-loss ratio was about 70% in 2020, reflecting a lower result due to patients’ deferred routine care amid the pandemic. Overall, medical costs were up to $46.55 billion, or more than a third higher year over year.

With patients returning, the improving trends bodes well for medical device manufacturers, hospital operators, and drug companies, which will begin reporting second quarter earnings next week, Charley Grant writes for the Wall Street Journal.

Looking ahead, the health care industry could begin to see the impact of patients catching up on deferred care, along with higher unemployment and other economic effects.

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