The healthcare sector is poised for a major comeback in 2025, according to analysts at Strategas. Chris Verrone, head of macro and technical trading at Strategas, explains, “Health care’s weight in the S&P is at its lowest … in about 25 years.So you have this generational oversold condition.” This undervaluation,coupled with signs of life in specific sectors,has created a promising outlook for investors.
Verrone highlights medical device makers as especially attractive. “It’s the place where you’re seeing the biggest price enhancement. Names that come to mind — Agilent, Abbott Laboratories — you’re starting to see some hints of life,” he observes. This sentiment is reflected in the market, with shares of Agilent and Abbott Laboratories both surging over 10% in the first few weeks of the year. The iShares U.S. Medical Devices ETF (IHI) has also experienced a important gain of over 9% year-to-date.
interestingly, history suggests that the healthcare sector tends to perform well under republican administrations. Strategas analysts note that, since the Reagan era, health stocks have outpaced the S&P 500 in the first year of Republican presidencies. “We believe investors price in the potential earnings cuts before the new president takes office and the stocks benefit when the worst-cast scenario does not materialize,” the analysts explain.
However, the sector faces certain headwinds, particularly regarding Medicaid.Large-cap health insurers, already struggling with two consecutive years of negative returns – a first in 25 years – are facing new pressure. With the Trump administration’s focus on reducing federal spending, concerns are mounting about potential cuts to Medicaid funding, a move that could impact companies like Centene and Molina Health, which have both seen their shares decline since Trump’s election. Hospital operators HCA Holdings and Universal Health Services have also suffered, with drops of nearly 15% and 13% respectively since the election.
While the outlook for some segments within healthcare remains uncertain, others, like pharmacy benefit managers (PBMs), are facing scrutiny from both sides of the aisle. President trump has publicly expressed his intention to address the issue of high drug prices, putting PBMs in the spotlight. Strategas notes that industry reforms,potentially included in the upcoming continuing resolution bill due March 14,could significantly impact the sector. While major PBM parent companies, including unitedhealth Group, CVS Health, cigna, and Elevance, deny duty for rising drug prices, they are adapting to the mounting pressure. UnitedHealth, for instance, recently announced plans to pass on all rebates and discounts negotiated by its PBM unit to patients by 2028.
Despite the challenges, the healthcare sector is showing signs of resilience. The S&P 500 Managed Care subsector,such as,has climbed nearly 6% year-to-date,indicating renewed investor confidence.
How are historical trends in Republican presidencies factored into Strategas’ positive outlook for healthcare in 2025?
Table of Contents
- 1. How are historical trends in Republican presidencies factored into Strategas’ positive outlook for healthcare in 2025?
- 2. Healthcare Sector Poised for a Comeback in 2025: A Conversation with Strategas’ Chris Verrone
- 3. Archyde: Chris, Strategas is predicting a healthcare comeback in 2025. What’s fueling this positive outlook?
Chris Verrone: Well, healthcare’s weight in the S&P 500 has fallen to its lowest point in about 25 years. This creates what we call a generational oversold condition. Couple that with emerging signs of strength in specific sectors, and it paints a very promising picture for investors.
Archyde: Which sectors are showing the moast promise?
- 4. Archyde: Strategas has noted historically strong performance for healthcare stocks in Republican presidencies. Does that factor into your 2025 prediction?
- 5. Archyde: Despite these positives, Medicaid funding cuts pose a important headwind.What’s your take on that?
- 6. Archyde: Pharmacy Benefit Managers (PBMs) also seem to be in the crosshairs. What’s happening there?
- 7. Archyde: Despite these uncertainties, investor sentiment seems to be improving.
- 8. Archyde: what’s your final thought for investors considering healthcare in 2025?
Healthcare Sector Poised for a Comeback in 2025: A Conversation with Strategas’ Chris Verrone
The healthcare sector is projected to rebound in 2025, according to analysts at Strategas. Chris Verrone, Head of Macro adn Technical Trading at Strategas, joins Archyde to discuss the factors driving this optimism.
