January 10, 2019
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.
Source: Morningstar, for the period Dec. 31, 1988 to Dec. 31, 2018. Index data based on MSCI Emerging Markets Index (gross).
What this means for investors:
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.