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THE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & LifestyleTHE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & Lifestyle

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Strategas sees health care outperforming in 2025

The U.S. healthcare sector, undervalued and facing reduced regulatory scrutiny under Trump’s administration, is poised for a strong rebound in 2025. Key growth areas include medical device manufacturers, while challenges persist for Medicaid insurers and PBMs. Strategas highlights this as a rare inflection point, offering long-term opportunities for investors.

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The U.S. healthcare sector, long a cornerstone of the economy, appears ready to reclaim its spotlight in 2025 after a prolonged period of underperformance and regulatory challenges. This projection, highlighted by Strategas, a prominent macroeconomic and investment strategy firm, points to a confluence of market conditions and political shifts that could collectively fuel a strong recovery. For investors, the signs are clear: the healthcare sector might soon outpace the broader market.

According to Chris Verrone, Head of Macro and Technical Trading at Strategas, healthcare stocks have reached a “generational oversold condition.” Verrone explains that the sector’s weight in the S&P 500 is at its lowest level in nearly 25 years, marking a rare turning point. Some companies are already capitalizing on this potential upward trajectory. Medical device manufacturers such as Agilent and Abbott Laboratories have seen their stocks rise by over 10% in early 2025, while the iShares U.S. Medical Devices ETF (IHI) has gained more than 9% year-to-date.

This resurgence is not unfolding in a vacuum—it is closely tied to a shift in Washington’s regulatory climate. Under President Donald Trump’s administration, the healthcare sector is benefiting from reduced regulatory scrutiny, a trend that has historically boded well for the industry. Data from Strategas underscores this phenomenon: healthcare stocks have typically outperformed during Republican presidencies, achieving average gains of 7.6% in the initial years.

However, the recovery is not uniform across the sector. Large-cap health insurers and hospital operators are navigating daunting headwinds. Centene and Molina Health, for instance, have faced stock declines of around 9% amid concerns over proposed Medicaid funding cuts. Hospital giants, including HCA Healthcare and Universal Health Services, are also struggling, with their shares falling 15% and 13%, respectively. These challenges stem from the Trump administration’s efforts to offset the costs of extending the 2017 tax cuts by reducing federal Medicaid matching rates and scaling back funds for states that expanded Medicaid under the Affordable Care Act.

Political uncertainty compounds these struggles, as moderate Republicans in Congress might resist the extent of proposed Medicaid reductions. This back-and-forth has weighed heavily on Medicaid-dependent insurers and healthcare providers, leaving these subsectors under pressure.

Another area facing scrutiny is the pharmacy benefit manager (PBM) business model. Companies like CVS Health, UnitedHealth, and Cigna are under bipartisan fire for opaque pricing practices. Responding to this scrutiny, President Trump has suggested reforms that could overhaul PBM operations. Legislative changes are expected in the coming months, with UnitedHealth Group already announcing plans to transition its PBM to pass all rebates and discounts directly to patients by 2028. Though these reforms introduce short-term uncertainty, companies are signaling adaptability, helping to sustain modest stock gains.

Despite these sector-specific challenges, the broader outlook for healthcare remains robust. Medical device manufacturers and life sciences companies stand out as promising areas of growth, benefiting from favorable market conditions and renewed investor interest. Their momentum could act as a catalyst for the sector’s broader recovery.

What is the takeaway for everyday investors? Strategas advises looking past the immediate noise. As Chris Verrone aptly stated, healthcare stocks are approaching a rare inflection point, offering significant long-term growth opportunities. In a market environment where healthcare has been under pressure for years, now appears to be the moment for astute investors to take notice. With the sector poised for a potential rebound, 2025 could very well mark the beginning of a new chapter for healthcare stocks.


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