The health care sector is the stock sector that comprises the stocks of companies that deal in the provision of health care products and services such as manufacturing of medical equipment, pharmaceuticals, and supplies and also companies that run health care facilities, hospitals, and provide health care services.
The stocks under the health care sector are considered to be defensive because the services and products are crucial to the healthy living of people. The companies in the sector provide essential products and services that are demanded daily; therefore, the stocks of such companies perform well in a declining stock market. Irrespective of the state of the economy, there is always a need for medicine and medical help to overcome illness.
The sector is less sensitive to fluctuations in the business cycle due to a constant demand for health care products and services. However, the stocks of companies in this sector are subject to several factors- positive and negative, which can have a significant impact on the performance of the stocks in the stock market.
Factors Having Positive Effects on the Health Care Sector
The performance of the stocks of the health care sector in the stock market can experience a positive and upward movement as a result of the factors highlighted below which will increase the demand for the products and services of health care industries:
1. Advancement in technology
2. Rise in diabetes and obesity incidence
3. Increase in personalized medicine
4. Increase in number of people living longer with chronic diseases
5. Rise in the population of old people and baby boomers
Factors Having Negative Effects on the Health Care Sector
The health care stock sector can experience a setback when there is a reduction in the demand for health care products and services as a result of the following factors:
1. Introduction of cost controls
2. Introduction of a single-payer system
3. Adoption of consumerism
4. Increase in the number of uninsured persons
Subsectors under the Health Care Sector
Under the health care sector are companies or industries that engage in products and services in the following subsectors:
1. Health Care Equipment and Services: Health Care Equipment and Supplies (Health Care Equipment, Health Care Supplies), Health Care Providers and Services (Health Care Distributors, Health Care Services, Health Care Facilities, Managed Health Care), and Health Care Technology
2. Pharmaceuticals, Biotechnology and Life Sciences: Biotechnology, Pharmaceuticals, and Life Sciences Tools and Services
The stocks of the health care sector have been a good long-term bet for investors. The sectors’ performance has remained encouraging and profitable over the years.