A new year, a new story?

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.

Created with Highcharts 4.1.5 Average return percentage Average return of MSCI Emerging Markets Index (Dec. 1988-2018) -17% 4% 9% 20% Down market: Trailing 1-year average Down market: Trailing 1-year average Next 3 monthsNext 6 monthsNext 12 months-20%-15%-10%-5%0%5%10%15% 20%25% Next 12 months Series 1: 20

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.


Source: Morningstar


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Past performance does not guarantee future results.

International investments entail risks including fluctuation in currency values, differences in accounting principles, or economic or political instability. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility, lower trading volume, and higher risk of market closures. In many emerging markets, there is substantially less publicly available information and the available information may be incomplete or misleading. Legal claims are generally more difficult to pursue.

The views expressed represent the Manager's assessment of the market environment as of Dec. 31, 2018 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.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index designed to measure equity market performance across emerging market countries worldwide. Index “gross” return approximates the maximum possible dividend reinvestment.

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