Healthcare stocks have outperformed the technology sector by 35.6 percentage points over the last six months. This represents the largest lead for the healthcare industry in 25 years. Data from The Kobeissi Letter indicates that healthcare stocks rose by 31.7 percent during this period, while technology stocks declined by 3.9 percent.
The shift in investor sentiment began in late spring as confidence in artificial intelligence trades weakened. Between the end of April and October 26, the S&P 500 Healthcare Index increased by approximately 23 percent. Major contributors to this growth included Eli Lilly, AbbVie, and Johnson & Johnson. Goldman Sachs advised investors to pivot toward healthcare in October.
Market volatility continued into November, with the Nasdaq falling 5.52 percent on November 5 due to concerns regarding a potential data-center slowdown. The current performance gap is the widest since the dot-com bubble burst, when the lead reached 48.5 points. For comparison, the gap peaked at 22.9 points during the 2008 financial crisis and 21.2 points in 2022.
Despite the current trend, Morningstar now classifies healthcare as the third most overvalued sector in the United States. Recent earnings reports have also presented challenges, as Johnson & Johnson posted disappointing results in October. Technology stocks have shown signs of recovery, gaining 2.5 percent on November 9 as part of a broader market rally across all S&P 500 sectors.
