By Shashwat Chauhan and Kanchana Chakravarty August 5 Investors are pouring money into U.S. healthcare stocks, betting that improving earnings, rising dealmaking and attractive valuations will extend the sector’s rebound after years of underperformance.
The renewed appetite for healthcare reflects a broader shift in investor positioning, with financials also seeing gains, as Wall Street’s rally expands beyond the handful of AI-linked technology companies that have dominated returns for much of the year
The S&P 500 healthcare index has climbed 11.2% in the past three months to hit a record high, outpacing the S&P 500’s 6% rise. Around 50 U.S.-listed healthcare funds attracted $2.44 billion in July, according to LSEG Lipper data, extending June’s nearly $1.5 billion inflow and reversing a three-month stretch of net withdrawals. “Healthcare offers a rare combination of durable growth, technology-like profitability, attractive valuation and diversification benefits at a time when many investors remain heavily concentrated in the AI theme,” J.P. Morgan analysts led by Head of Global Markets Strategy Dubravko Lakos-Bujas said.
A Bank of America survey showed global fund managers were net 32% “overweight” on healthcare stocks in July, up sharply from 14% in June. EARNINGS GROWTH, M&A HEATS UP The surge in healthcare follows a stretch as one of the S&P 500’s weakest performers in the first five months of the year, with investors now looking ahead to a sharp improvement in profitability. Earnings for S&P 500 healthcare companies are expected to grow in double digits from the fourth quarter of 2026 through the end of 2027, according to Tajinder Dhillon, head of earnings and equity research at LSEG.