Healthcare Takes Wall Street Lead: 4 Picks

Wall Street recorded solid gains in the last trading session, with the S&P 500 and the Nasdaq Composite logging their best weekly performance since December 2011 and the Dow Jones Industrial Average posting the best weekly numbers since November 2016. These weekly gains helped all the three major indexes to end last month in green.

 But, it was the most popular trade over the past one and a half period that has given way in November to another sector that has now taken the baton of leadership on Wall Street. The healthcare sector registered a gain of more than 6% in November, while one of the new entrants among the S&P 500’s 11 sectors, communications services that include Facebook, Inc. (FB - Free Report) turned out to be among the worst performers in the past 30 days.

Here is a look at how the S&P 500 sectors fared in November —

 (Source: SPDR Sector Tracker)

And this outperformance by the health-care sector that displaced the so-called FAANG stocks — Facebook, Amazon.com Inc. (AMZN - Free Report), Apple Inc. (AAPL - Free Report), Netflix Inc. (NFLX - Free Report) and Google-parent Alphabet Inc (GOOGL - Free Report) may not be a one-off, market pundits said.

Continuous innovation and research in the field of biotechnology and an increasingly aged population in the United States are helping whet appetite for healthcare shares.

Moreover, this particular sector is more defensive in nature compared to other major S&P 500 sectors like technology. Thus, their demand has increased by leaps and bounds as U.S. economic expansion is widely expected to slow down in the coming years owing to the waning effect of the Trump administration’s corporate tax cuts.

Also, whether the stock market is a bull or bear one, the need for medical and health care products is constant. Needless to say, most of the healthcare companies are mature firms that provide stable cash flows, encouraging profits and offer some big yields. There is plenty of growth left in their tank from new drugs in development.

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