Healthcare stocks begin 2025 with headwinds and election-driven uncertainty compounding an already tough market.
And election jitters aren't entirely to blame for the volatility, The Wall Street Journal reported Jan. 6.
President-elect Donald Trump's appointment of industry skeptics like Robert F. Kennedy Jr. to lead HHS has spurred selloffs across hospitals, pharmaceuticals, insurers and biotech. Anticipation of a Republican crackdown on Medicaid and the Affordable Care Act add to motivation for selloffs.
But the election isn't the sole driver of healthcare's slump. The sector has underperformed the S&P 500 for two years in a row, trailing by 22 percentage points in 2023 and another 20 in 2024, according to theJournal. Goldman Sachs data reveals significant outflows from healthcare ETFs, second only to energy.
Despite the bearish outlook, opportunities remain. One Goldman analyst cited in the Journal points to single-stock investments in companies delivering innovative products or those with undervalued stocks, sustainable business models and high dividends.
Meanwhile, 2025 looks to be a pivotal year. Election-driven selloffs have often been followed by rebounds, as policy changes tend to be less disruptive than initially feared. How the year plays out could determine whether healthcare regains investor confidence or continues to lag behind broader market performance.
As Barron's put it: "Healthcare stocks have gotten crushed in 2024, and next year doesn't look much better. But there are still opportunities for investors willing to sort through the wreckage."