The combination of small-cap stocks and the healthcare sector is proving rewarding for investors this year. Just look at the PowerShares S&P SmallCap Energy Portfolio (NasdaqGM: PSCH), which is up nearly 41% year-to-date.

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.

PSCH targets the S&P SmallCap 600 Capped Health Care Index. That benchmark “is designed to measure the overall performance of common stocks in the health care sector. Included are healthcare companies principally engaged in the business of providing healthcare-related products and services, including biotechnology, pharmaceuticals, medical technology and supplies, and facilities,” according to Invesco.

More Catalysts in Healthcare

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.

PSCH “is up more than 40% this year, even after fading from a record high Aug. 31. Shares have glided to the 50-day moving average, where a rebound will leave the ETF in a buy area. Investors should buy as close as possible to the 50-day average (now around 139) once shares start to bounce back,” reports Investor’s Business Daily.

Small-cap stocks and the related ETFs are outperforming large-cap equivalents this year, a trend some market observers expect will continue through year-end.