This article was originally published on ETFTrends.com.
As investors keep riding the bulls through this historic run in U.S. equities, many might be wondering which sector to allocate their capital to as the markets delve deeper into this late Cycle. One sector that could see continued strength once this bull run begins to lose its momentum is health care, and leveraged ETF plays like the Direxion Daily Healthcare Bull 3X ETF (CURE) could be worth a look.
CURE seeks daily investment results equal to 300% of the daily performance of the Health Care Select Sector Index. The index CURE tracks includes domestic companies from the healthcare sector, which includes the following industries: pharmaceuticals; health care equipment and supplies; health care providers and services; biotechnology; life sciences tools and services; and health care technology.
According to an article in Reuters, health care has been in the forefront in the major sectors of the S&P 500 for the third quarter, rising as much as 13%. Before then, tech and consumer discretionary have been in pole position, but as investors begin to cycle out of growth, they could be looking to more value-oriented sectors like health care to lead them out of the bull market and beyond.
“In sector reallocation, momentum certainly plays a role, and we are still very early in the momentum of the healthcare sector,” said David Lafferty, chief market strategist at Natixis Investment Managers.
Furthermore, health care is continuously looking to utilize today's technology and could be more transformative. allowing for more efficiency in operations, such as the use of blockchain technology. The use of blockchain has allowed the health care sector to start creating specific applications that take advantage of peer-to-peer data distribution, offering better versatility and security over database systems that are currently in use.
As a result, the use of blockchain technology can help pharmacies track their inventory more efficiently, as well as keep better track of dispensing medication to patients. Additionally, blockchain technology can help care providers, such as physicians, specialists, subspecialists, and surgeons share patient information easier for faster expediting.
With those improvements in technology and the price of health care equities relative to value propositions, health care could lead the sectors when a market correction eventually takes place.
“Healthcare really is giving investors a lot of bang for its buck right now,” said Martin Jarzebowski, healthcare sector head at Federated Investors.
As such, a health care ETF like CURE can also be used as a defensive play in addition to a short-term profit tool. As the bull run gets longer in the tooth, health care can serve as a safe-haven sector for investors cycling out of their growth-oriented investments.
“The later we get in the cycle, our enthusiasm for healthcare has only picked up,” Lafferty said.
CURE has returned 32.22% year-to-date and almost 40% within the past 12 months.
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