Market rotation is the most prevalent factor for healthcare outperformance, says Mizuho's Jared Holz

Summary

Jared Holz of Mizuho discusses the recent surge in healthcare, which has gained 10% in about a month. He attributes the move primarily to rotation out of tech into defensive sectors, plus a strong biotech run fueled by record M&A and FDA changes. He cautions that not all healthcare subsectors are participating equally.

• Healthcare has rallied about 10% in a month, narrowing its year-to-date underperformance to around 7%.
• The main driver is rotation out of large-cap tech/momentum into perceived defensive and value areas like healthcare.
• Biotech has had a standout run, with unprecedented M&A activity expected to make this a record year.
• FDA changes have been a point of contention but biotech performed well despite them.
• Small and mid-cap biotech may also benefit from diminished enthusiasm for crypto and broader risk-asset flows.
• Managed care is seeing some life for the first time in years, but gains are not broad-based across all healthcare subsectors.