Healthcare equities for diversification and defense
Running Point and its chief investment officer, Michael Ashley Schulman, CFA were quoted by U.S. News & World Report in an article — by Brian O’Connell, “6 Best Health Care ETFs to Buy Now” — regarding when it makes sense to emphasize healthcare equities.
Expectations for 2024
📈Stocks may generally do well in 2024, but if there is market choppiness, healthcare ETFs and stocks could relatvely outperform the broader market in what could be a chaotic and challenging election year.
⛑Health care ETFs and stocks are often considered defensive during market downturns, as people generally require healthcare services regardless of economic conditions. In that scenario, investors may buy healthcare stocks as a strategy to mitigate risks during economic recessions or broader market declines, as health care demand is not highly cyclical.
ETFs to consider
⚕Investor interest can also be driven by specific opportunities such as positive healthcare industry trends, breakthrough medical advancements, aging population demographics, pandemics, or regulatory changes that could potentially increase demand for health care products and services. Some general healthcare ETFs to consider are VHT, XLV, and FHLC, as all are large, relatively liquid, and have expense ratios under 0.1%.
✳Note, none of these are complete lists nor are they recommendations.
🩺When selecting a sector ETF, try to examine its underlying holdings and ensure that it contains the stocks of companies you expect or desire.
Past performance
Over time, the information technology, healthcare, and consumer discretionary sectors tend to be the strongest performers. However, of those, only technology has beaten the S&P500 over the last 10 years. Over a longer period of 16 years, since the beginning of 2008, four out of eleven stock sectors — information technology, healthcare, consumer discretionary, and consumer staples — outperformed the S&P 500 stock market index. Energy, real estate, communication services, utilities, materials, and financials, while providing good industry diversification, have tended to underperform the main index over long time periods, while the performance of industrials has hovered a little below the S&P 500. Importantly, of course, past performance for any sector is not an assurance of future returns.
Quoted article excerpts are below:
“VHT is a good example of a general health care ETF that is large, liquid and has a low expense ratio,” says Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors in Manhattan Beach, California.
“Lower interest rates or an economic rebound may help some of health care’s more beaten-down sectors of equipment, biotech and small cap for funds like XBI,” Schulman says.
🤣”I told the doctor I broke my leg in two places. He told me to quit going to those places.” ~~Henny Youngman
🤕”The doctors x-rayed my head and found nothing.” ~~Dizzy Dean
😆”Never go to a doctor whose office plants have died.” ~~Erma Bombeck
🙊”My doctor gave me six months to live, but when I couldn’t pay the bill he gave me six months more.” ~~Walter Matthau
Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Past performance is not indicative of future results. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-24-24
