Why Healthcare Sector is a Great November Play

It is already the second-best sector this year behind technology, but the healthcare sector has a penchant for performing well in November.

On historical basis, healthcare’s November bullishness includes biotechnology and pharmaceuticals stocks, two of the largest industry weights in diversified 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.

The SPDR S&P Biotech ETF (NYSEArca: XBI), one of the largest biotech ETFs, has already notched some impressive year-to-date returns, but XBI’s 2017 performance could grow even stronger if historical, seasonal trends hold true to form. XBI is one of the best-performing non-leveraged ETFs in November.

“As you can see, the biotech sector tends to fare the best, with the SPDR S&P Biotech ETF (XBI) and SPDR S&P Pharmaceuticals (XPH) boasting average November gains of at least 3.5% over the past decade. However, the IYR (real estate) has ended the month higher just 20% of the time in 10 years, according to Schaeffer’s Senior Quantitative Analyst Rocky White, and averages a monthly loss of 3.39%,” according to Schaeffer’s Investment Research.