Health Sector Review: Cutbacks by the Government are Beginning to Hurt
The healthcare sector XLV had a series of multiple tops at the $160 level from NOVEMBER ’25 through early March and is now at $145.74, a four-month low down 5.85 % YTD.
In contrast, the XLE bottomed on DECEMBER 31 at about $44 and has climbed to the $60 level with a brief choppy few days in early March at $56, up 33.75% YTD.
The biggest disappointment for 2026 is the weakness in MEDTech and Health Science stocks, and we’ll need to provide more analysis, but for starters, let’s say for MEDTech and US Medical Devices, it is cybersecurity and tariffs; for HealthScience some of the former issues, but the assault on University Research by the Administration has been a major factor.
By now, most investors know that with the War raging with Iran, you should have re-balanced your portfolio with an overweight in ENERGY, which in 2025 was about 3% of the S&P 500. Over the past 5 DAYS, here is how the sectors performed: with the S&P down 2.42%.
LEADERS: ENERGY up 2.54%, UTILITIES up 1.21%.
LAGGARDS: Healthcare down 3.74%, Consumer Discretionary down 3.24%, Comm Services down 2.85%.
The surprise to me was that healthcare underperformed too poorly. The XLV is down 4.95% YTD and 6.68% for the month. In a previous s post on LinkedIn, I learned from my own trading and holdings that the MEDtech and Health Science sectors have been over the past several months among Healthcare stocks. The IHF offers no help, down 11.34% YTD, down 7.5% over the month.
We last did a Review of the healthcare sectors on January 29, and here are some comparisons:
First para is from 1/29/26-bullet below is the update:
MedTech: Is having a disappointing year with my Top 3 Holdings YTD and One year: ABT at $106 down 15.3% YTD, down 17% one year; ISRG at $107.5 down 10.4% YTD, down 11.38% one year, BDX at $201 up 3.6% YTD, down 18.5% one year. The IHI is down 12.78% YTD and down 8. 8% over one year.JNJ at $227 should be considered a hybrid MedTech/biopharma, and it is a major outperformer, up over 50% over one year. 1/29/26
The Fidelity Select Medical Technology and Device Fund (FSMEX) P $51.70, shows the magnitude of the Health Science and MedTech sectors: Down 14.5% YTD and down 16.38% over one year. TOP holdings include: BSX, DHR, TMO, ISRG, and EW. At one time in 2025, TMO was one of our top healthcare positions, and now it is down 18% YTD!. The high was $643 on 1/28/26, now at $476.
The IHI peaked at $64 in early January, just before the JPM Healthcare Conference. JNJ is at $237, slightly higher.
Biopharmaceuticals: The IBB at $174.25 is up 3.25% YTD and 26.7% over one year; the equal-weighted, more volatile XBI is at $126.73 and is up 3.94% YTD and 36.9% over one year. FBIOX is up 34% over one year. SMID movers to watch from our trading list: ABOS, AXSM, BBIO, DNTH. 129/26
As of 3/20/26, the IBB at $163 s down 3.54% YTD and up 22% over one year; the XBI at $123.32 is down 0.5% YTD and up 40% over one year.
The Top BIOTCH FUND (FBIOX) P 24.77, is down 1.43% YTD and up 27% over one year.
The SMID biotech sector should be the focus for traders, as can be seen by the performance of the XBI. There are some big winners for Q1 ’26 DNTH 87%, ROIV up 26%, SLDB 26%
Strategy for Investing: A few large-cap picks with FBIOX and IBB as a base, combined with trading SMID-cap biotech stocks.
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