Healthcare Stocks Offer a Prescription for Resilience Plus Growth

Healthcare stocks rank high on our like list, boasting a history of resilience amid both inflation and recession as well as attractive growth prospects thanks to potent innovation. Dr. Erin Xie examines the opportunity.

Healthcare is one of life’s necessities as well as a critical element of equity portfolios today, particularly as investors seek resilience in the face of macroeconomic turbulence. Dr. Erin Xie, lead portfolio manager of the BlackRock Health Sciences Opportunities Fund, addresses key questions for those with an investment ― or a healthy interest ― in healthcare stocks.

What makes healthcare a compelling opportunity now?

The sector has a history of stability and outperformance during periods of both recession and inflation, as healthcare demand has historically held firm regardless of economic conditions. Over the last seven recessionary periods in the U.S., healthcare outperformed the broader market by an average of 10%.1 The sector also has demonstrated relative resilience during inflationary episodes.

Yet the opportunity goes beyond the defensive. We view healthcare as a long-term, structural growth sector driven by global aging trends. And we see opportunities to invest in a wide variety of companies, ranging from large to small and from stable to innovative. It’s this prospect of diversification ― as well as the global nature of the sector ― that makes healthcare a sector for all scenarios, in our view.

Should investors expect to pay up for this kind of opportunity?

Healthcare stocks are not expensive today and, in fact, are priced below the broader market. Slowing economies call for the resilience that healthcare companies can offer, yet the sector remains at a 10% discount to global equity markets compared to an average premium of 3% over the past two decades. (See the chart below.)

Healthcare stocks available at a discount