Plenty of sector exchange traded funds have been battered since the start of the fourth quarter, but some defensive plays are performing less poorly than growth and momentum fare. For example, the Health Care Select Sector SPDR ETF (NYSEArca: XLV), the largest healthcare ETF by assets, is down just 1.6% in the current quarter.

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, the market’s best-performing sector this year with a 9 percent gain versus the S&P 500’s 0.2 percent loss, looks attractive to Matt Maley, equity strategist at Miller Tabak,” reports CNBC.

Political Outlook

With the Democrats taking over the House of Representatives and Republicans widening their majority lead in the Senate, Congress won’t be able to take another stab at overturning the 2010 Affordable Care Act, which extended health insurance cover to millions of previously uninsured Americans.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.