What Does the Fed’s Cautious Move Mean for the Healthcare Sector?
S&P 500 Rose in March on Fed’s Caution and Commodity Rally
The Fed’s cautious move boosted healthcare sector
In March, the Health Care Select Sector SPDR ETF (XLV) rose 1.6%. On March 29, 2016, Federal Reserve chair Janet Yellen set a dovish tone for the next rate hikes, citing global outlook risks.
On March 29, the defensive industries such as healthcare and utilities rose 1.2% and 1.5%, respectively. Investor sentiment generally turns towards defensive industries when there is more risk in the global outlook.
Healthcare sector performance
On a year-to-date basis, the healthcare sector has fallen 8%. Major drug manufacturers such as Eli Lilly (LLY), Pfizer (PFE), Allergan (AGN), and Bristol-Myers Squibb (BMY) have fallen 15.6%, 6.8%, 12%, and 8.8%, respectively, as of March 31, 2016.
Moving average
On April 1, 2016, the healthcare sector crossed its 100-day moving average. However, in March, it traded below its 100-day moving average and on par with its 20-day moving average. In March, we have not seen any crossover between the short-term 20-day moving average and the long-term moving average of the XLV. If there will be any crossover of moving average in the near future, then we may see a change in the trend.
In the next part, we will analyze how the information technology sector performed in March.
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