The healthcare sector has historically been one of the fastest growing sectors among the S&P500, offering growth for example in biotechnology. On the other hand, the sector also demonstrates defensive qualities (e.g. Pharma), offering high dividend yields. Currently, we observe interesting fundamentals, where the healthcare sector offers – for only the second time in history – a higher dividend yield than the S&P500. As shown in the figure below, the sector has outperformed by 3.2ppt in 2010 and by 1.9ppt end of 2021.
Furthermore, a study of Bank of America reveals that for 18 quarters in a row a higher proportion of healthcare companies is beating on sales as well as EPS estimates compared to the S&P500. The first quarter of 2022 supports this finding, pointing to defensiveness of the sector amid heightened macro uncertainty.
As discussed previously, the healthcare sector is expanding. Population ageing is the dominant global demographic trend of the 21st century and probably the biggest driving force in healthcare growth. However, as shown in the following illustration, there are also other factors that are influencing the future growth of this sector.
The global healthcare sector is subject to numerous influences and is being reimagined not only in the face of aging populations, but also increased number of chronic diseases, growth in emerging markets and shifting reimbursement models. Particularly in emerging markets, we expect that the modernization of healthcare infrastructure and spending on healthcare from emerging market economies will lead to increased healthcare consumption over the coming decades.
Over the past year, vaccines have received much of media attention, however, there are also many innovative areas of healthcare. The world is becoming smart. Smart cities, smart cars, smart home leverage the internet of things (IoT), big data and artificial intelligence (AI). Also health care organizations have to master digital innovation. New technology will continue to change the way healthcare is provided and managed. Nowadays, technology is enabling robotic-assisted surgeries and telehealth.
Not only the global health care market, but also the global health insurance market is growing. Driven by increasing health care expenditure as well as the growing number of chronic diseases the market is expected to see steady growth. According to Globe newswire, the market stood at a revenue of USD 2.6 trillion in 2021 and is expected to reach USD 3.3 trillion by 2028. Furthermore, business models of health care insurers benefit from rising interest rates.