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Health Care Stocks Show Relative Strength as S&P 500 Stalls
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The U.S. economy has begun to show signs of weakness as we head into the summer months. This morning, the Bureau of Labor Statistics reported that job openings fell in April to their lowest level in more than three years. The new data revealed that there were 8.06 million jobs open at the end of the month, a decrease from the 8.35 million openings in March.
Coming off the heels of a weak April jobs report, it’s yet another sign that the hiring boom following the pandemic is cooling off. We’ll get more in the way of jobs data later this week with the release of May’s employment report.
Last week, the Bureau of Economic Analysis reported that the U.S. economy grew at a slower pace in the first quarter than previously anticipated. The second estimate for Q1 GDP showed the economy grew at an annualized pace of 1.3%, down from the 1.6% seen in the initial estimate.
This all bodes well for stocks in the short-term, as declining treasury yields should serve as a tailwind moving forward. Still, we’re clearly encountering a pickup in volatility in the first week of June.
Historical Stats Point to Summer Rally
As we inch closer to the latter half of 2024, action is heating up with the Presidential election in sight. We can see below that in Presidential election years such as this one, the S&P 500 tends to rally during the summer months. The June-August period is the strongest 3-month period during election years going back to 1928, with an average gain of 7.27%:
Image Source: Zacks Investment Research
Gains in the third and fourth quarters are also positive. Recent volatility may turn out to be a great buying opportunity.
Of course, there’s no way for us to know the future. While historical statistics point to the potential for more strength ahead, seasonality analysis isn’t a sure thing. But it pays to know where the probabilities lie.
As investors, our job isn’t to predict an unknowable future. Our job is to position our portfolios in the direction that stocks are most likely to go. No one can consistently predict tops and bottoms of every move, but we can take advantage of major trends and allow our investing capital to compound over time. That’s what it’s all about.
Health Care Stocks Showing Strength
The health care sector has been holding up well amid the recent volatility. Within the broader health care space, the Zacks Medical – Biomedical and Genetics industry group is currently ranked in the top 35% out of approximately 250 industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months.
Quantitative research studies suggest about half of a stock’s future price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. By targeting stocks contained within leading industry groups, we can dramatically improve our odds of success.
We can also see that stocks in this group are projected to see above-average earnings growth, serving as another confirmation signal that this group is a great place to be:
Image Source: Zacks Investment Research
Several stocks are displaying relative strength and trading at or near 52-week highs. Regeneron Pharmaceuticals (REGN - Free Report) is breaking out of a cup-with-handle base, pushing up against all-time highs. Regeneron’s drug portfolio is expected to see a boost in sales, driven by an aging population and overall increase in the prevalence of diabetes.
Image Source: StockCharts
REGN is currently a Zacks Rank #3 (Hold). The stock has advanced 13.5% this year.
Vertex Pharmaceuticals (VRTX - Free Report) is another stock within the same industry group that is showing signs of outperformance. The company’s products are collectively approved to treat nearly 75% of the 92,000 people with cystic fibrosis (CF) in North America, Europe, and Australia.
Vertex enjoys a strong position in the CF market, which represents huge commercial potential. Earnings are projected to grow 12% year-over-year.
VRTX stock is also a Zacks Rank #3 (Hold). Shares are up better than 15% this year and have broken out to an all-time high.
Image Source: StockCharts
Bottom Line
Cracks have begun to show in the economy as weak data rolls in. Still, historical statistics paint a favorable picture in the months ahead.
We want to stick with stocks that are holding up well through the volatility, as they are likely the ones to lead the next leg up once the market finds its footing.
Make sure to keep an eye on these leading health care stocks that are breaking out to new heights.
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Health Care Stocks Show Relative Strength as S&P 500 Stalls
The U.S. economy has begun to show signs of weakness as we head into the summer months. This morning, the Bureau of Labor Statistics reported that job openings fell in April to their lowest level in more than three years. The new data revealed that there were 8.06 million jobs open at the end of the month, a decrease from the 8.35 million openings in March.
Coming off the heels of a weak April jobs report, it’s yet another sign that the hiring boom following the pandemic is cooling off. We’ll get more in the way of jobs data later this week with the release of May’s employment report.
Last week, the Bureau of Economic Analysis reported that the U.S. economy grew at a slower pace in the first quarter than previously anticipated. The second estimate for Q1 GDP showed the economy grew at an annualized pace of 1.3%, down from the 1.6% seen in the initial estimate.
This all bodes well for stocks in the short-term, as declining treasury yields should serve as a tailwind moving forward. Still, we’re clearly encountering a pickup in volatility in the first week of June.
Historical Stats Point to Summer Rally
As we inch closer to the latter half of 2024, action is heating up with the Presidential election in sight. We can see below that in Presidential election years such as this one, the S&P 500 tends to rally during the summer months. The June-August period is the strongest 3-month period during election years going back to 1928, with an average gain of 7.27%:
Image Source: Zacks Investment Research
Gains in the third and fourth quarters are also positive. Recent volatility may turn out to be a great buying opportunity.
Of course, there’s no way for us to know the future. While historical statistics point to the potential for more strength ahead, seasonality analysis isn’t a sure thing. But it pays to know where the probabilities lie.
As investors, our job isn’t to predict an unknowable future. Our job is to position our portfolios in the direction that stocks are most likely to go. No one can consistently predict tops and bottoms of every move, but we can take advantage of major trends and allow our investing capital to compound over time. That’s what it’s all about.
Health Care Stocks Showing Strength
The health care sector has been holding up well amid the recent volatility. Within the broader health care space, the Zacks Medical – Biomedical and Genetics industry group is currently ranked in the top 35% out of approximately 250 industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months.
Quantitative research studies suggest about half of a stock’s future price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. By targeting stocks contained within leading industry groups, we can dramatically improve our odds of success.
We can also see that stocks in this group are projected to see above-average earnings growth, serving as another confirmation signal that this group is a great place to be:
Image Source: Zacks Investment Research
Several stocks are displaying relative strength and trading at or near 52-week highs. Regeneron Pharmaceuticals (REGN - Free Report) is breaking out of a cup-with-handle base, pushing up against all-time highs. Regeneron’s drug portfolio is expected to see a boost in sales, driven by an aging population and overall increase in the prevalence of diabetes.
Image Source: StockCharts
REGN is currently a Zacks Rank #3 (Hold). The stock has advanced 13.5% this year.
Vertex Pharmaceuticals (VRTX - Free Report) is another stock within the same industry group that is showing signs of outperformance. The company’s products are collectively approved to treat nearly 75% of the 92,000 people with cystic fibrosis (CF) in North America, Europe, and Australia.
Vertex enjoys a strong position in the CF market, which represents huge commercial potential. Earnings are projected to grow 12% year-over-year.
VRTX stock is also a Zacks Rank #3 (Hold). Shares are up better than 15% this year and have broken out to an all-time high.
Image Source: StockCharts
Bottom Line
Cracks have begun to show in the economy as weak data rolls in. Still, historical statistics paint a favorable picture in the months ahead.
We want to stick with stocks that are holding up well through the volatility, as they are likely the ones to lead the next leg up once the market finds its footing.
Make sure to keep an eye on these leading health care stocks that are breaking out to new heights.