As technology stocks retreat from their highs, funds shift to low-valued healthcare sectors, which begin a catch-up rally driven by favorable policies.

Glonghui Jan 8｜The healthcare sector of the US stock market has traditionally been regarded as a defensive sector, thanks to robust growth and generous dividend yields from industry giants. But this narrative is changing. After years of underperforming the broader market, the healthcare sector experienced a reversal last quarter, becoming the best-performing sector among the 11 major groups in the S&P 500 Index. This sharp turnaround followed a tariff agreement reached with the Trump administration, a series of acquisitions, and the prospects of next-generation weight-loss drugs. Meanwhile, concerns over overvalued technology stocks have made lower-valued sectors like healthcare more attractive to investors seeking other growth opportunities. Against this backdrop, many investment professionals expect this momentum to continue through 2026. Brian Mulberry, portfolio manager at Zacks Investment Management, stated: “Certain segments within healthcare require very careful consideration, but there are indeed some bright spots. Understanding how to pick specific companies that will benefit from a new wave of regulation will be an important part of investing in the new year.”