Healthcare Sector Is Lagging As We Enter 2022 Earnings Season

Healthcare Text Screenshot Near Green Fern Leaf

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Healthcare Sector Is Lagging in 2023

  • Small Cap Biotech has momentum but large-cap biopharma lags.
  • Technology and Semiconductors lead the market in 2023.
  • Upcoming earnings could be pivotal

We are in the foggy zone between JPM23 and earnings season so it is hard to forecast healthcare and biotech stocks performance. We can gauge technicals and trade major life science ETFs. The healthcare sector is perceived as defensive but in 2023 there is more investor appetite for risk based on the QQQs comeback and the XBI strength. Healthcare lags in 2023 while semiconductors are ho with the SMH is up 15% YTD.

(Click on image to enlarge)

(Click on image to enlarge)

The market is still clouded by the Fed’s determination to raise rates and keep money tight. The next Fed Meeting is in February and expectations are for a 0.25% rate increase. In the meantime, many economists and strategists are expecting a mild recession. Earnings and guidance will be telling

Here are some trends to watch based on the data and recent trading.

  1. Based on my trades and other momentum indicators- ARKG, XBI- the small-cap rally should continue through January.
  2. Large cap biopharma sold off from JPM23 week. That is expected since they led throughout 2022.
  3. MedTech sector is improving: FSMEX, IHI.
  4. The IBB looks better than the XLV for non-traders.
  5. Key Earnings and guidance to watch over the next 2 weeks:  DHR 1/24, TMO, ABT 1/25, 2/1, HOLX 2/1, BDX 2/2, ILMN 2/7, MRNA 2/22, large-cap biopharma on 2/2, VRTX 2/7,
  6. Two large cap biopharma stocks are included in the Investors Business Daily IBD Big Cap 20 rankings: #1 Vertex Pharmaceuticals (VRTX) and #4  BioMarin Pharmaceutical (BMRN).
Model                      
PORTFOLIO                      
    2020   2020 2020 2021 2022 2023      
Stock/ETF Ticker Price Wgt Price   Price P 1Y Price YTD  
    10/25 % 12/31 % Perf 12/31/21 12/31/22 %Perf 1/22 % Perf  
                       
iShares NAZ Bio IBB* 136 15 151.5 25.7 152.62 130.55 3.69 135.47 3.18  
                       
iShares Russell 2k IWM 163 10 196.4 18.3 222.45 174.36 -7.83 185 6.13  
Merck* MRK 80 10 81.77 -10 76.64 110.81 36.15 109.94 -0.91  
United Health UNH 330 20 350.7 27.19 502 530.27 5.12 486,72 -8.2  
SPDR S&P Bio XBI 117 10 140.8 48 111.96 83 -5.41 86.99 4.81  
Healthcare SPDR XLV 108 25 113.4 14.71 140.89 135.88 2.39 133.91 -1.43  
T.Rowe Hlth Sci PRHSX n/a 5 99.65 n/a 104 89 -0.81 90.15 0.37  
iShares U.S MedT IHI 50 5 54.83   65.85 52.57 -8.86 54.54 3.75  
MedTech* ABT new 5 123.5   127.46 109.83 -9.53 112.82 2.76  
                       
Tracking Comp                      
                       
ARK Genomic ARKG     93.26   61.24 28.23 -31.97 32.49 15.09  
Direx3X Bull LABU           7.66 -58.91 7.84 10.89  
FIDO Biotech FBIOX     25.18   19.35 16.04 4.21 16.57 1.78  
FIDO MEDtech FSMEX     76.15   83.18 61.58 -10.39 64.28 4.38  
DOW DIA     310   363.32 331.34 -3.93 333.67 0.71  
S&P 500 SPY     379   475 382.41 -11.39 395.88 3.52  
NASDAQ-100 QQQ     315   397.85 266.33 -21.85 282.68 6.16  
                       
Top Biopharmas                      
                       
Abbvie ABBV           161.64 12.45 149.59 -7.44  
Bristol Myers Sq BMY           71.58 14.82 74.15 3.06  
Gilead Sci GILD           85.39 22.42 83.01 (3.31)  
Eli Lilly LLY           362.94 42.34 346.07 -5.4  
Merck MRK           110.94 36.15 109.94 -0.91  
Regeneron REGN           721.7 17.52 722 0  
Vertex VRTX           288.78 35.53 309.84 7.29

More By This Author:

J.P.Morgan Healthcare Conference JPM23: Biotech Rally Favors Smaller Caps
Nice Gains During JPM23 Week: Benign CPI Report Brings Hope For A “Soft Landing”
Healthcare Portfolio Is Doing Well But Biotech Stocks Are Mired In Macro

Disclosure: long ABT, ABBV,  IWM, IHI, MRK, PRHSX, UNH, VRTX, XBI.

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