Healthcare Stocks: Positioned for a Smoother Ride in 2024?

In the wake of recent underperformance, healthcare is entering the new year with compressed valuations just as innovation picks up and a post-COVID reset winds down. That should make for a positive outlook, say Portfolio Managers Andy Acker and Dan Lyons

Key takeaways:

  • The healthcare sector is coming off a year of underperformance as COVID sales declined, bond yields rose, and new weight-loss therapies caused disruption.
  • As a result, many healthcare valuations have contracted, which could bolster the sector’s resilience to an economic slowdown or potentially amplify returns from new growth drivers.
  • We think this dynamic creates an opportunity for investors to benefit from healthcare’s defensive and growth qualities heading into 2024.

The healthcare sector went on a bumpy ride in 2023, with some areas like medical devices flipping from gains to losses and makers of new anti-obesity drugs seeing their stocks achieve high double-digit returns.

Looking ahead, we think the road could begin to smooth out. Attractive valuations, numerous medical advances, and positive long-term demographic trends have put the sector into a position of unusual strength in our view – with the potential to reward long-term investors.