Investors often view healthcare as a safe haven sector, but as market confidence returns, demand for riskier assets could push investors away. However, there could be signs of early summer bullishness.
Healthcare surged during the pandemic and allowed investors to seek confines in the safe haven sector amid rising inflation and higher interest rates. As investors head out of safe havens, they may want to think twice about healthcare, especially given May data regarding its fundamentals.
“In May, hospitals saw slightly improving operating margins, declining expenses and increases in outpatient visits, according to the National Hospital Flash Report from Kaufman Hall,” Medical Economics reported. “The median year-to-date operating margin index was 0.3% for the month, up from 0.1% in March and April. While improving, these levels are still well below pre-pandemic figures.”
Additionally, the report noted that patients are also coming back to hospitals with more emergency visits and higher operating room minutes as of late. While not the fever pitch activity experienced during the pandemic, it’s an encouraging sign nonetheless that more patients are returning.
“Hospitals may no longer be experiencing the post-pandemic effect of pent-up demand for inpatient services, but patients are showing us they are becoming more comfortable with receiving care in this setting,” said Erik Swanson, senior vice president of data and analytics with Kaufman Hall, in a statement. “Hospitals can expect a new normal of slowly increasing margins that may never return to pre-pandemic levels without reevaluating how and where care is being delivered.”
Tripling Leverage on Healthcare
If the trend of increased hospital visits during the summer persists, traders can take a look at the Direxion Daily Healthcare Bull 3X ETF (CURE). CURE 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, such as pharmaceuticals, healthcare equipment and supplies, healthcare providers and services, biotechnology, life sciences tools and services, and more. The pandemic has affected all these sub-industries in some form or fashion, giving traders dynamic opportunities to play the market.
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