- Healthcare funds have performed better than others during some past stock market downturns, but that might change in a new market plunge.
- An aging population in need of care, combined with a weak economy, could put financial pressure on big healthcare providers.
- Healthcare stock funds have been the top-performing of all 101 fund categories tracked by Morningstar over the last five years.
"This time is different" has proven to be a losing mantra for many a stock investor, but healthcare funds have outperformed others in past downturns. Morningstar reports the funds have returned an average of 19.1% annually over the past five years—the best of any category of funds.
But markets can be brutal to former over-performers—and it's easy to see that as financial security changes for a new generation of seniors, the healthcare sector could face a scenario where the people that most need its services are among those least able to pay for them. And The Associated Press notes that healthcare stocks in the S&P 500 now trade at 20 times trailing earnings; five years ago, that price-to-earnings ratio was 12, indicating the stocks have become really expensive relative to their performance.