Since the recent election, the stock market has witnessed a significant surge, driven largely by sectors like financials and energy. The ascendance of President-elect Donald Trump has sparked a rally, with the S&P 500 financial sector climbing nearly 8% in just one week. Energy stocks have also participated in this bullish momentum, gaining nearly 5%. However, while attention has been fixated on these traditional beneficiaries of the so-called “Trump trade,” investors may overlook the evolving dynamics within the health-care industry, which may offer promising investment opportunities.
Jeremiah Buckley, a portfolio manager at Janus Henderson, argues that the health-care sector, counterintuitively overlooked, is poised for growth. Despite only experiencing a modest increase of just under 2% in the past week and being among the worst-performing categories within the S&P 500 this year, health-care stocks might be ready for a resurgence. The regulatory climate for health care has been particularly challenging in recent years, characterized by price controls on medications and numerous compliance intricacies affecting Medicare and Medicaid. However, with a new administration at the helm, positive changes could begin to emerge for the sector.
Health care’s potential for advancement is bolstered not only by a more receptive political environment but also by groundbreaking research and innovation taking place within the industry. Buckley highlights that recent developments, particularly in drug therapies and medical technology, can drive performance in this sector. For instance, the introduction of GLP-1 receptor agonists is propelling growth for major pharmaceutical players like Eli Lilly, showcasing the dynamic nature of health-care advancements.
Moreover, innovations in areas such as oncology, diabetes management, and medical devices portend additional growth avenues. As utilization trends normalize post-pandemic, health-care service companies may see improved profit margins, highlighting the sector’s robust recovery potential.
Among the investment strategies espoused by Buckley and his team at Janus Henderson is a focus on health-care stocks within their U.S. Dividend Income Fund. This fund boasts key holdings like UnitedHealth Group, AbbVie, and Medtronic, all of which reflect a commitment to investing in companies positioned to benefit from favorable policy shifts and innovation. Furthermore, other funds managed by Buckley, such as the Growth and Income Fund, also encompass a substantial allocation to influential health-care names, reinforcing a belief in the sector’s latent potential.
While financial and energy sectors appear to be the front-runners following the election, the health-care industry offers a compelling alternative that is worthy of attention. The amalgamation of a potentially friendlier political landscape, ongoing innovation, and strong foundational companies positions health-care stocks to emerge as a viable investment opportunity. As investors navigate a post-election landscape, a diversified approach that includes foresighted investments in the health-care sector could lead to more balanced and potentially profitable outcomes.