Staying healthy amid volatility

Investors faced a challenging 2018, as trade tensions, increasing US interest rates, and concerns about slowing economic growth weighed heavily on the market. This was evident around the world, with almost all major global equity indices finishing the year in negative territory, including the S&P 500® Index, which fell more than 4% during 2018. It’s worth noting that healthcare stocks, as measured by the Russell 3000® Healthcare Index, rose more than 5% in 2018.

As investors grapple with positioning their portfolios for the future, it may be helpful to review how healthcare has behaved during negative (bear market) and positive (bull market) quarters over the past 20 years. The chart below shows the extent to which healthcare equities have protected to the downside during negative periods, falling roughly 4% on average, compared with a more than 7% decline for the S&P 500. In fact, healthcare equities meaningfully outperformed the S&P 500 overall for the 20-year period, by about two percentage points on an annualized basis.

20 years of Bull and Bear quarters

Performance period: December 31, 1998 — December 31, 2018

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Chart of the month

Source: Morningstar

As investors become increasingly concerned about further market corrections, it may be a good time to consider more direct exposure to healthcare equities. We believe the asset class should continue to benefit from its defensive characteristics, powerful secular trends, and transformative technological breakthroughs.

To learn more about healthcare as a solution for growth, visit Define Your Destination and find out what your investments can help you achieve.


IMPORTANT RISK CONSIDERATIONS

Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.

Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.

Healthcare companies are subject to extensive government regulation and their profitability can be affected by restrictions on government reimbursement for medical expenses, rising costs of medical products and services, pricing pressure, and malpractice or other litigation.

The views expressed represent the Manager's assessment of the market environment as of February 2019 and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the Manager's views.

All third-party marks cited are property of their respective owners.

The Russell 3000 Healthcare Index measures the performance of all healthcare holdings included in the Russell 3000 Index, which represents the 3,000 largest US companies based on total market capitalization.

The S&P 500 Index measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the US stock market.

Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company.

Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.

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