One of the things I love most about bull markets is how they try to include everyone.
Everyone is making money.
Whether it’s growth stocks or value stocks. US stocks or international stocks. Gold or bitcoin.
It’s all working and we’re all happy. The parties are better. You get the picture.
And the reason this is true is because most risk assets participate in bull markets.
Even the bad ones join the party eventually.
And of course, we can always find bad stocks that are bucking the trend and falling, but I’m talking about subgroups and thematics. Most areas end up working.
At the end of a sustained bull market, the list of groups that didn’t go up will be very short.
It’s a hallmark characteristic of the good times.
The leaders drag the laggards higher. The worst ones end up looking more like the best ones. And not the other way around.
This is often referred to as sector rotation. But it’s really just an expansion in participation when it occurs over longer timeframes.
I guess what I’m saying is that bull markets make it hard to miss.
And this is what has me thinking about healthcare stocks today.
Here’s a look at SPDR Healthcare $XLV relative to the S&P 500:
I understand there are some political headwinds, but holy cow. How much worse could it get for this battered sector?
XLV is at the same level it was back in 2008 relative to the broader market. There has been literally zero alpha here for the last quarter century.
The 4-week rate of change (similar to a rolling monthly) recently hit its lowest level in history for the XLV/SPY ratio.
The bottom line is being a health care investor has been really terrible for a really long time.
But I think we’re near the end of the road here. It appears this extreme momentum reading is signaling exhaustion.
It is time for healthcare stocks to participate in this bull market, and even assume a leadership role, if only for the short term.
So we figured we’d get ahead of this trend and identify the best candidates to fuel the rebound when it comes.
Here’s a table showing the top-performing healthcare stocks since the market bottomed last month.
There is a nice mix of names from various industries. And more importantly, there are plenty of bullish setups that are actionable right here, right now.
I like the idea of adding exposure to some of these leaders as a way to position for healthcare rotation in the future.
Let’s run through some of our favorites.
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