The recent election of President-elect Donald Trump has ignited a wave of optimism in the financial and energy sectors, sparking significant market rallies. Following the election results, the S&P 500 financials sector surged nearly 8%, with energy stocks witnessing an increase of approximately 5%. This trend illustrates how investors are quick to take advantage of a perceived “Trump trade,” capitalizing on the expectations of policy shifts that could favor financial institutions and energy producers. However, while these sectors are reaping the benefits, it is vital for investors to broaden their horizons and consider alternative investment opportunities that may yield favorable returns.
Healthcare Sector: An Overlooked Gem
According to Jeremiah Buckley, a seasoned portfolio manager at Janus Henderson, there is an emerging opportunity within the healthcare sector that investors have largely overlooked in light of the recent market exuberance. While financial stocks have experienced a robust acceleration, Buckley argues that these stocks may be overvalued and that the healthcare industry could provide a more sustainable path for growth. Having only increased by under 2% during the same post-election timeframe, healthcare stocks have been the third-worst performing sector in the S&P 500 thus far this year.
The past four years have proved challenging for the healthcare sector, predominantly due to stringent regulations surrounding Medicare, Medicaid, and pharmaceutical pricing. Buckley maintains that the incoming administration might usher in a more favorable regulatory framework, which could revitalize the healthcare industry by alleviating some of these burdens. With an optimistic gaze towards the future, he suggests that investors may benefit as the sector likely rebounds from its current struggles.
Innovation within the healthcare industry is another crucial factor that Buckley emphasizes. Significant advancements in research and development are occurring, especially in healthcare services. For instance, the flourishing market for GLP-1 medications has led to impressive growth for major pharmaceutical companies like Eli Lilly. Additionally, ongoing innovations in cancer treatment and diabetes management are poised to reshape the landscape of healthcare. Investors should be especially aware of the potential revenue increases among healthcare service providers as utilization rates stabilize.
In line with these insights, Buckley manages various funds at Janus Henderson that prominently feature healthcare stocks. The U.S. Dividend Income Fund includes well-known firms such as UnitedHealth Group, AbbVie, and Medtronic, reflecting a strategic focus on companies with strong fundamentals. The fund also includes significant investments in biotech giants like Gilead Sciences and Amgen. Such selections underscore Buckley’s belief in the potential for robust long-term performance in the healthcare space.
While the financial and energy sectors currently capture the spotlight, the healthcare sector presents an equally compelling and potentially prosperous investment avenue. With the right strategic insights and an appreciation for innovation, investors may find that these overlooked stocks can deliver substantial returns in the years to come.