The aftermath of recent elections has undeniably reverberated through stock markets, especially following President-elect Donald Trump’s victory. Investors have seen a remarkable surge in both financial and energy stocks, marking what has been popularly dubbed the “Trump trade.” The financial sector alone has experienced an impressive near 8% hike, with energy stocks climbing approximately 5%. However, as many investors enthusiastically pile into these sectors, they may be overlooking a crucial opportunity within healthcare stocks, which are currently lagging but poised for potential gains.
According to expert insights from portfolio manager Jeremiah Buckley at Janus Henderson, the healthcare sector has not participated as robustly in this recent market rally. While financials and energy stocks have basked in the limelight, healthcare stocks have trailed, only slightly increasing by nearly 2% in the same time frame. Despite being perceived as a weaker component of the S&P 500, this presents a potential opening for discerning investors. Buckley suggests that the upcoming Trump administration could bring a more favorable regulatory climate for healthcare, a sector that has faced stringent rules and challenges over the past four years.
The obstacles within the healthcare industry are significant. Price controls on drugs and rigorous regulations encompassing Medicare and Medicaid have made it difficult for many healthcare companies to thrive. However, the anticipated policy shifts may present a much-needed easing of these burdens, allowing for a rejuvenation of growth opportunities.
Beyond just regulatory changes, it is essential to recognize the innovation simmering within the healthcare sector, particularly in pharmaceuticals and health service providers. Buckley highlights the groundbreaking advancements in technologies such as GLP-1 drugs, which have spurred considerable growth for industry leaders like Eli Lilly. Furthermore, prospects in oncology and diabetes treatments are expanding, alongside advancements in medical devices.
As the focus shifts to health services, there remains considerable optimism regarding improving profit margins. A normalization of utilization trends—whereby healthcare becomes more frequently sought after—could spell greater financial stability for these companies. Therefore, the potential for profit within this sector is not merely wishful thinking but grounded in tangible innovations and market trends.
For investors contemplating diversifying into healthcare, it would be prudent to consider established funds that are already positioned in this sector. Funds managed by Buckley, such as the U.S. Dividend Income Fund, hold notable stakes in companies like UnitedHealth Group, AbbVie, and Medtronic, all of which are crucial players in the health services landscape. Furthermore, other funds such as the Growth and Income Fund contain similar allocations, establishing a strong fundamental base for potential investment.
While the spotlight currently shines on financial and energy sectors, there’s a compelling case for investors to explore the healthcare arena. With a potential regulatory shift and significant innovations underway, healthcare stocks may provide the hidden opportunities sought after by astute investors looking for growth in a transforming market landscape.