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What to Expect from the Healthcare Sector in 2H17

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Performance of the healthcare sector

The healthcare sector has been the second-largest gainer in the S&P 500 Index (SPY) so far this year. The Health Care Select Sector SPDR ETF (XLV), which tracks the performance of the healthcare sector, rose nearly 13.5% on a year-to-date basis as of August 25, 2017.

In the first half of 2017, the XLV ETF rose nearly 13.3%. Major holdings of the XLV such as Johnson & Johnson (JNJ), Pfizer (PFE), UnitedHealth Group (UNH), and Amgen (AMGN) represent nearly 11.7%, 6.5%, 6.1%, and 4.2%, of the XLV portfolio, respectively. These stocks returned nearly 14.2%, 1.8%, 14.8%, and 14.3%, respectively, in the first half of 2017.

The healthcare sector showed huge fluctuations in 1H17. The failure of the healthcare restructuring bill in Congress played an important role in the sector’s movement. On the other hand, the stronger earnings growth of various healthcare stocks supported the movement of this sector.

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If the healthcare restructuring bill passes in Congress, then we could see more upside in this sector. The healthcare sector is considered a defensive sector. The defensive sector has little correlation with the business cycle, so it is also known as a non-cyclical sector. Investors generally invest in the defensive sector to protect their investments from the business cycle ups and downs.

In the next part of this series, we’ll analyze the performance of the industrial sector in the first half of 2017.

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