Healthcare

The last employment report in the U.S., published last week evidenced a problem with the U.S. labor market: no job growth in any sector of the economy with the exception of healthcare. On the top chart below, you can clearly see that. How is the sector doing in terms of market returns? You can see that on the bottom chart by subsectors, all of them have been below the broad index (S&P500) for the past 12 months. How is thr current earnings season going for them? Early previews expected modest year-over-year EPS growth (around 0-6% in some subsectors like pharma), with downward revisions during the quarter for many companies. However, actual results have been mixed, with some sub sectors showing strength. Pharma/Biotech: Strength in innovative drugs (e.g., GLP-1 weight-loss treatments driving demand). Companies like Eli Lilly have seen strong expectations and results tied to blockbuster drugs. Health Insurers/Managed Care: Pressure from rising medical costs, utilization, and Medicare/Medicaid challenges. Some faced profit squeezes, with notable impacts on major players. Providers/Services: Mixed, with rebounds in patient volumes for some but ongoing cost inflation. What this means, perhaps, is that underneath the surface, we have a very weak labor market, threatened by AI, supported by growth in one sector that is having mixed performance. This is hard evidence for the Fed, which seems to be ignoring it, still fixated with inflation stickiness. Odds for a cut in March are still very low.

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