Investors looking for a sector level summer rental in the financial markets may want to consider healthcare ETFs, such as the Health Care Select Sector SPDR (NYSEArca: XLV).
XLV 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 health care.
“Health care has been the best-performing sector between June and August since 1990, according to a new Oppenheimer note. But if the sector rallied this year, not all names in the group would participate, said the firm’s top technician,” reports CNBC.
XLV, the largest healthcare ETF by assets, is up nearly 4% over the past month.
A Healthcare Industry Idea
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.
The iShares U.S. Medical Devices ETF (NYSEArca: IHI), the largest dedicated medical devices exchange traded fund, is up nearly 17.5% year-to-date.
IHI is “breaking out to the upside, it’s been a source of leadership, it scores very well in our momentum ranks (we like high momentum), and it’s broadly strong, too,” said Oppenheimer head technician Ari Wald in an interview with CNBC. “There’s a lot of medical device companies that are participating and acting as that leadership. That’s what we want to own.”
IHI has recently been hitting record highs. The medical device ETF is up more than 54% over the past two years, nearly triple the gains of XLV over the same period.
“The health-care sector is the fourth-best performer in the S&P 500 for the year to date. The XLV health-care ETF’s 1 percent gain in 2018 is weaker than a nearly 3 percent advance by the S&P 500,” according to CNBC.
For more information on the healthcare sector, visit our healthcare category.