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If there was a prevailing theme to the stock markets in November, it was that investors got jittery about overvalued tech and AI stocks and sold off shares.

But the other major theme was the strength of healthcare stocks. They surged to the top of the leaderboards of the S&P 500, Nasdaq Composite and Dow Jones Industrial Average in November.

The healthcare sector within the S&P 500 index returned about 7.5% in November, by far the best performer among the sectors. Most other sectors were down for the month, with communication services finishing second best with a 4.5% monthly return.

Within the healthcare sector, pharmaceutical stocks led the way, returning about 17.6% for the month as an industry. Biotech stocks were also strong, returning about 7% last month.

What drove healthcare stocks higher?

There are a few broad reasons that healthcare and pharmaceutical stocks outperformed last month. One of them is simply a rotation out of high-valued tech stocks into a more defensive sector like healthcare. Healthcare stocks are generally seen as somewhat of a safe haven when the larger market turns south, because healthcare is something people need no matter the economy. In 2022, for example, when the S&P 500 was down 18%, healthcare stocks outperformed by a considerable margin.

Another major factor is interest rates. The Federal Reserve lowered interest rates for the second time in two months in October, which gave a boost to healthcare stocks. Thatʻs because lower interest rates make it cheaper for them to invest in new drugs and treatments. It also spurred more M&A activity, as there were a couple of major deal last month.

One of them was Abbott Labs buying Exact Sciences for $21 billion. Johnson and Johnson, GE Healthcare, and Merck also made major acquisitions last month, among others.

There were also some strong earnings that drove certain healthcare stocks higher, including Eli Lilly (NYSE: LLY). Specifically, Lilly posted strong third quarter results based on a huge surge in revenue from its GLP-1 weight loss drugs, Zepbound and Mounjaro. The company also signed a deal with the Trump Administration to lower drug price in exchange for tariff exemptions and other trade-offs.

The winners

The aforementioned Eli Lilly was the second-best performing stock on the S&P 500 last month, returning 32.2% for the month. Lilly stock is up 37% YTD and is rated a buy by most analysts. However, its median price target if $953 per share suggests a -10.7% return over the next 12 months, but this may be because many analysts haven’t yet updated their price targets.

It should be noted that Ablemarle (NYSE: ALB), an industrial company that produces lithium for batteries, was the best S&P 500 stock in November, returning 32.9%. It is up 51% YTD.

The third best S&P 500 stock last month was Cardinal Health (NYSE: CAH), which is a distributor of pharmaceutical and medical device products. Cardinal Health stock returned 29.1% in November and is up 78% YTD. Here are the top 5 stocks in November.

• Ablemarle (ALB): +32.9%
• Eli Lilly (LLY): +32.2%
• Cardinal Health (CAH): +29.1%
• Expeditors International (EXPD): +25.1%
• Biogen (BIIB): +23.1%

Biogen was the top stock overall on the Nasdaq Composite with its 23.15 return while IDEXX Labs (Nasdaq: IDXX), a leader in animal health and water testing, was next with a 20% return. Biotech company Regeneron Pharmaceuticals (Nasdaq: RGNR) was third with a 19.5% Novemver return followed by biotech company Amgen (Nasdaq: AMGN) with an 18.4% return.

Overall, the best 4 performers on the Nasdaq last month were healthcare stocks.

Finally, the best Dow Jones stock was also a pharmaceutical firm, Merck (NYSE: MRK), which returned 21.1%, followed by Amgen and Johnson and Johnson (NYSE: JNJ) with a 10.9% November return.

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