Why Investors May Be Turning To Healthcare
By Jonathan Jones and Tom Lydon The Health Care Select Sector SPDR ETF (NYSEArca: XLV ) is up 2.3% over the past month and the largest healthcare exchange traded fund has shown some signs of awakening out of a long slumber, but some traders are not convinced, according to industry analyst ETF Trends . For XLV and rival healthcare ETFs, the good news is that the U.S. economy moving into the late-cycle phase, overall growth may slow and signs of an economic slowdown could pop up. Consequently, investors may also turn to defensive sectors that are less economically sensitive, such as health care. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020. Additionally, the actuaries calculated that around 8.4 million Americans became insured in 2014 and noted their increased use of medical services. The number of people on Medicaid is projected to increase to 78.1 million by 2024, outstripping Medicare, which is expected to have 70.3 million enrolled. Those anecdotes and data points apply to the long-term. In the near-term, some options traders are expressing doubt regarding XLV’s upside. “optionMONSTER’s tracking program detected the sale of 5,000 March 65 puts sold for $0.06 and the purchase of 5,000 April 65 puts for $0.69 today. Volume was below open interest in the near-term contracts, which expire at the end of this week, indicating that a bearish position was rolled forward by a month,” according to optionMONSTER . XLV is heavily allocated to blue-chip pharmaceuticals names, such as Dow components Johnson & Johnson (NYSE: JNJ ), Merck (NYSE: MRK ) and Pfizer (NYSE: PFE ), but the ETF also devotes more than 20% of its weight to biotechnology stocks. “Puts outnumbered calls by a bearish 4-to-1 ratio” in XLV on Wednesday, according to optionMONSTER. Health Care Select Sector SPDR Click to enlarge Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.