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Healthcare stocks have demonstrated a July rebound but continue to lag the broader market so far this year. The S&P 500 Health Care Select Sector ETF (XLV), featuring giants like Eli Lilly (LLY - Free Report) and Johnson & Johnson (JNJ - Free Report) , has risen 7.7% this year, compared to the S&P 500 Index's 16% gain (as of Jul 18, 2024).
Earnings and Outlook
The healthcare sector has seen earnings decline for six successive quarters, affecting overall S&P 500 earnings growth. Analysts, however, are optimistic about a strong rebound in the upcoming second-quarter earnings, expecting continued improvement through 2025.
After gaining in 2020 due to pandemic-related demand, healthcare stocks faced challenges in 2023 with a "COVID-19 hangover." Despite a recent uptrend in 2024, the sector trails behind TechnologyETF (XLK - Free Report) and Communication ServicesETF (XLC - Free Report) . Technology stocks have been gaining due to the artificial intelligence (AI) boom.
Compelling Valuation
Dan Eye of Ford Pitt Capital Group highlights healthcare's attractive valuation relative to the broader market, as quoted on Yahoo Finance. He highlighted favorable demographic trends, such as an aging population and increasing healthcare spending, as tailwinds for the sector's growth.
Medical Sector currency has an upbeat Zacks Sector Rank #4. The PEG (ratio) of the Medical sector is 1.95 versus 2.22 of the S&P 500.
Innovation and Specific Growth Areas
Recent years have seen significant FDA drug approvals and advancements in medical breakthroughs, particularly in AI and GLP-1 drugs. Eli Lilly's success with its Alzheimer's drug and GLP-1 development demonstrates notable growth within the pharmaceutical segment. The Medical sector’s projected EPS growth rate is 15.13% versus the 6.76% growth rate of the S&P 500.
Any Wall of Worry?
Analyst Dan Eye, however, warned that healthcare stocks can become political targets, especially amid debates over Pharmacy Benefit Managers (PBM) practices. Still, demographic shifts and ongoing medical innovations are tailwinds. However, the overall medical sector lacks on dividend payments.
ETFs in Focus
Against this backdrop, below we highlight a few healthcare and biotech ETFs that have offered sturdy gains in the past week.
Range Cancer Therapeutics ETF (CNCR - Free Report) – Up 11.84% Past week
Image: Bigstock
Time for Healthcare ETFs?
Healthcare stocks have demonstrated a July rebound but continue to lag the broader market so far this year. The S&P 500 Health Care Select Sector ETF (XLV), featuring giants like Eli Lilly (LLY - Free Report) and Johnson & Johnson (JNJ - Free Report) , has risen 7.7% this year, compared to the S&P 500 Index's 16% gain (as of Jul 18, 2024).
Earnings and Outlook
The healthcare sector has seen earnings decline for six successive quarters, affecting overall S&P 500 earnings growth. Analysts, however, are optimistic about a strong rebound in the upcoming second-quarter earnings, expecting continued improvement through 2025.
After gaining in 2020 due to pandemic-related demand, healthcare stocks faced challenges in 2023 with a "COVID-19 hangover." Despite a recent uptrend in 2024, the sector trails behind Technology ETF (XLK - Free Report) and Communication Services ETF (XLC - Free Report) . Technology stocks have been gaining due to the artificial intelligence (AI) boom.
Compelling Valuation
Dan Eye of Ford Pitt Capital Group highlights healthcare's attractive valuation relative to the broader market, as quoted on Yahoo Finance. He highlighted favorable demographic trends, such as an aging population and increasing healthcare spending, as tailwinds for the sector's growth.
Medical Sector currency has an upbeat Zacks Sector Rank #4. The PEG (ratio) of the Medical sector is 1.95 versus 2.22 of the S&P 500.
Innovation and Specific Growth Areas
Recent years have seen significant FDA drug approvals and advancements in medical breakthroughs, particularly in AI and GLP-1 drugs. Eli Lilly's success with its Alzheimer's drug and GLP-1 development demonstrates notable growth within the pharmaceutical segment. The Medical sector’s projected EPS growth rate is 15.13% versus the 6.76% growth rate of the S&P 500.
Any Wall of Worry?
Analyst Dan Eye, however, warned that healthcare stocks can become political targets, especially amid debates over Pharmacy Benefit Managers (PBM) practices. Still, demographic shifts and ongoing medical innovations are tailwinds. However, the overall medical sector lacks on dividend payments.
ETFs in Focus
Against this backdrop, below we highlight a few healthcare and biotech ETFs that have offered sturdy gains in the past week.
Range Cancer Therapeutics ETF (CNCR - Free Report) – Up 11.84% Past week
AdvisorShares Psychedelics ETF (PSIL - Free Report) – Up10.7%
AdvisorShares Psychedelics ETF (GNOM - Free Report) – Up 9.2%
Amplify Treatments Testing and Advancements ETF (GERM - Free Report) – Up 9%
Virtus LifeSci Biotech Clinical Trials ETF (BBC - Free Report) – Up 8.9%