Healthcare's comeback trade

If you wanted a contrarian sector on the ASX in 2025, healthcare was it. While resources and utilities pushed higher, health care was one of only two sectors trading lower for the year, down more than 20 per cent at one point. That slump has set up an interesting question for 2026: is this just a value trap, or the start of a comeback?[4][2]

Globally, there are signs the tide is turning. BlackRock notes that healthcare ETFs saw about 6.8 billion US dollars of inflows in November 2025 alone—the biggest monthly haul in five years—as investors rotated out of stretched US tech into more defensive growth stories. The sector had been trading at roughly a 30 per cent discount to global equities in mid‑2025, the deepest underperformance since the early days of Obamacare in 2009. As policy uncertainty around drug pricing eased, performance began to improve, helped by long‑term drivers like ageing populations and demand for new treatments.[5]

On the ASX, a handful of large names dominate healthcare exposure, but their stories differ: some are classic defensives with steady cash flows, others are more speculative biotech or device makers that live and die on trial results. Rising bond yields and risk‑off periods have hit the whole complex, even where individual earnings have held up.[6][3][2]

The case for a “comeback trade” in 2026 rests on three points:

• valuations have reset after a rough couple of years;
• the long‑term demand story (ageing, chronic disease, innovation) is intact;
• investors are nervous about a tech bubble and looking for sectors with solid fundamentals but less hype.[8][5]

None of that guarantees a straight‑line rally, and stock‑picking still matters. But for portfolios that are heavy in banks and resources, healthcare now offers something rare: exposure to genuine long‑term growth at a time when the market has largely lost interest in it.

Sources
https://www.ig.com/au/news-and-trade-ideas/asx-200-market-outlook-2026-251209[2] https://www.fool.com.au/2025/12/31/best-and-worst-performing-asx-200-sectors-of-2025/[4] https://www.raskmedia.com.au/2025/12/16/which-asx-sectors-performed-best-in-2025/[3] https://www.blackrock.com/au/insights/ishares/2026-comeback-year-for-healthcare[5] https://www.morningstar.com.au/markets/get-set-bumpy-2026[6] https://www.livewiremarkets.com/wires/the-big-risks-investors-should-be-paying-attention-to-in-2026[8]