Equities across the board haven’t been safe from the downward sell-off pressure. That also goes for healthcare, which is typically steady in times of volatility. When compared to the broader S&P 500, it has been just that lately.
So far this year, the S&P 500 Health Care index is down just 8%. Compare that to the more broad S&P 500, which is down about 20% thanks to a technology sector that’s been succumbing to inflation fears.
Still, recession fears could hit the healthcare sector. It’s already showing in the number of deals slowing, according to a Bloomberg Law article.
“Health-care dealmaking decreased in May under the pressure of record-setting inflation,” the article said. “The number of completed or announced mergers and acquisitions was 154 in the month, down from 176 in April. The May total also marked a sharp drop from January, which saw 274 transactions.”
Nonetheless, healthcare has proven to be a viable alternative in times of economic distress. This could make the sector a prime option if a recession were to hit within the next year.
“This could result in increased health-care transaction activity in the short-term as investors may seek to utilize funds for acquisitions before interest rates potentially spike much higher over the next 12 months or more,” said Gary Herschman of Epstein Becker & Green.
Staying Bullish on Healthcare
Traders looking to play on their bullish sentiment in healthcare can give the Direxion Daily Healthcare Bull 3X ETF (CURE) a closer look; it seeks daily investment results equal to 300% of the daily performance of the Health Care Select Sector Index.
The index includes domestic companies from the healthcare sector, which includes pharmaceuticals, healthcare equipment, and supplies; healthcare providers and services; biotechnology; life sciences tools and services; and more. These sub-industries have all been affected by the pandemic in some form or fashion, giving traders dynamic opportunities to play the market.
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