Raymond James looks at the US healthcare sector

The US healthcare sector underperformed in 2024, and Raymond (NS:RYMD ) James discusses whether the new year will bring more good news as the new US administration takes office.

Healthcare was the third worst performing sector in the S&P 500 in 2024, underperforming its benchmarks across all cap sizes, although we saw larger disparities in large and mid cap.

At 10.1% of the S&P 500, healthcare is at a historically low weighting compared to recent years.

With the Fed dropping interest rates three times, or 100 basis points, in 2024, much of healthcare suffered, particularly those reliant on additional funding flexibility. Healthcare also felt an outsized impact from election results.

Healthcare EPS estimates fell around 10% in 2024 from the start of the year on the surface, but this was skewed by several non-recurring changes at some of its largest constituents.

S&P 500 healthcare 2025 revenue estimates are steadier but still down 3%, while revenue revisions for the group are actually near the best of all sectors for both 2024 and 2025.

Volumes remained broadly elevated in 2024 with the notable exceptions. While elective surgeries were the driver in 2023, volume strength broadened out in 2024 driven by ER visits and inpatient admissions.

As 2025 arrives, Raymond James expects volumes to remain strong but likely moderate a bit off 2024 levels due to tougher comparatives. 

The bank’s biggest question is whether investors continue to focus on near term volumes trends, or will focus shift towards potential headwinds in 2026 which include a likely decline in ACA insured lives and the implication on volumes, and potential changes to Medicaid reimbursement as the new administration sets their healthcare agenda? 

 

Source: Investing.com