Many view healthcare as a defensive sector because it has constant demand and is somewhat insulated from the economy. Down nearly 2% for the year to date, healthcare has badly lagged the gain of over 17% in the S&P 500 index as U.S. economic growth has heated up to what the Atlanta Federal Reserve estimates is a booming 5.9% expansion in the third quarter.
Overall, the healthcare sector - which ranges from health insurers like UnitedHealth to pharmaceutical companies like Pfizer to small biotechs - has received the third largest inflows of any sector year to date, BofA's data showed. Still, the sector .SPXHC is down around 2% year-to-date, one of few areas that have not joined the broad market rally, adding to its appeal among bargain hunters.
While U.S. growth has largely been robust this year, some investors who are bullish healthcare stocks believe that the Federal Reserve's interest rate hikes will eventually start to weigh on the economy. One potential sign of economic weakness came last Tuesday, when U.S. data showed job openings dropped to the lowest level in nearly 2-1/2 years in July as the labor marketLess pessimistic investors noted that the economy has been resilient thus far and shows few signs of cracking. This would weaken the case for loading up on healthcare stocks.at a 5.6% annualized rate in the third quarter, though analysts said they expect the estimate to drop as more data comes in.