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Healthcare Stocks Are Blowing Past the S&P 500. What Could Be Behind the Rally.

Nov 13, 2025 14:20:00 -0500 by Josh Nathan-Kazis | #Healthcare

(Dreamstime)

Key Points

Healthcare stocks are having an extremely good November, for no real reason whatsoever.

The healthcare stocks in the S&P 500 are up almost 7% since the start of November, while the broader market is down more than 1%.

There has been some news for healthcare companies over the past 13 days: Pfizer and Novo Nordisk duked it out over an obesity biotech, the Food and Drug Administration appointed a new drug chief, and hopes faded of an extension of Affordable Care Act subsidies.

But none of that is enough to explain why healthcare stocks are beating the broader market by nearly eight percentage points.

“I think that you can back into a fundamental explanation, but I don’t personally believe that the underlying fundamentals of healthcare have changed over the past week or two,” says Jared Holz, a healthcare equity strategist at Mizuho, in a Thursday morning call with Barron’s.

Instead, what appears to be happening is that some of the big pools of capital are dipping their toes back in healthcare as the largest tech stocks wobble. The Roundhill Magnificent Seven exchange-traded fund , which tracks Nvidia, Microsoft, and other Big Tech names, is down nearly 5% this month.

Healthcare valuations have been depressed this year, and investors seem to be betting on a bit of upside as they flee uncertainty elsewhere in the market.

That may or may not be good news for healthcare investors. What’s more heartening is that this month’s run-up adds juice to a stop-and-start reversal that began early this summer, but seemed to have lost steam in late October.

Created with Highcharts 9.0.1Source: FactSetAs of Nov. 13, 4:55 p.m. ET

Created with Highcharts 9.0.1S&P 500Healthcare sector2025Nov.-20-15-10-505101520%

“If you want to paint a fundamental argument as to why healthcare in total has gotten better, it’s that the Street has been discussing the same headwinds or risk factors for the better part of a year now,” Holz says. “And I believe that there are some investors that think that the companies can navigate the situation and come out the other end fine, at least at these valuations.”

Healthcare has been a persistent underperformer over the past few years. The S&P 500 Healthcare sector index , which tracks healthcare stocks in the S&P 500, was roughly flat in 2023 as the S&P 500 rose around 25%. The healthcare index was roughly flat again in 2024, while the S&P 500 climbed nearly 25% once more.

This year looked no better until mid-August.

Worries about President Trump’s threats to tariff drug imports, plus uncertainty at the Food and Drug Administration and persistent turmoil in the managed care industry, continued to weigh on the sector. As of the end of June, the healthcare index was down 2% on the year while the S&P 500 was up 5.5%.

Valuations were startlingly low: In early August, the healthcare index was trading at around 16 times earnings expected over the next 12 months, while the broader S&P 500 was trading at more than 20 times earnings, according to FactSet. UnitedHealth Group , one of the sector’s largest constituents, had seen its valuation fall to 12 times expected earnings as of early July.

Those low valuations seem to have reversed the thinking of many market players. UnitedHealth shares began to rebound after Warren Buffett announced his firm was taking a stake. Other stocks are up, too. “There’s the thought out there that they had priced in all of the risks,” Holz says.

The reversal started off slow, with an uptick for healthcare stocks in early August that accelerated in late September when Pfizer extracted a drug pricing and tariff deal from the Trump administration that appeared to be favorable for the company.

The Pfizer deal set off a short-lived buying spree in drug stocks. The S&P 500 Health Care sector climbed 5.5% on Sept. 30 and Oct. 1, as the market digested the deal with the White House. Then it stopped climbing: The sector index ended the month up 0.4% from its Oct. 1 close, while the broader S&P 500 rose by 1.9%.

The gains came back in November, for no particular reason. A mixed healthcare earnings season drew to a close the first week of November, with not-great results from Pfizer and Novo Nordisk.

The healthcare index at large has been in the green every day this month, climbing 2.3% on Nov. 11 and 1.4% on Nov. 12. It is now up 6.5% on the month.

Part of that, Holz says, is due to investors repositioning ahead of the next calendar year. Another bit is the weakness in tech stocks. The S&P 500 Information Technology sector index is down 4.7% this month.

“Maybe just a tiny piece of that is going into healthcare,” Holz says. “When you see money come out of a space, especially one that’s filled with trillion-dollar companies, it really doesn’t take much to get some of the underperforming sectors a little juice.”

Some of the move could come from investors spooked by worries of an artificial-intelligence bubble, looking for assets they see as steady performers even in economic downturns. Healthcare has a reputation as a defensive sector, though that’s mostly unearned: Healthcare stocks haven’t worked as defensive plays in recent years.

The sector still has ways to go toward recovery. Even with the recent run-up, the S&P 500 Healthcare sector index significantly trails the broader S&P 500 on the year. The healthcare sector is up 11%, while the S&P 500 is up 15%.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com