iShares Global Healthcare ETF (IXJ) deterioration
The iShares Global Healthcare ETF (IXJ) has been in decline since the end February. Is this cyclical or something more serious?
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Answer
Hi Robert,
At this stage we would be leaning towards cyclical but after enjoying a 15-year advance almost without interruption we cannot rule out a deeper pullback with the next 5% looking likely to be on the downside from momentum alone. This is a diverse global ETF with around 89% of holdings in Pharmaceuticals, Healthcare-products and Healthcare Services, across a number of countries:
- 68% US, 9% Switzerland, 5% UK, 4% Japan, 3% Denmark and 3 % France.
Many of the sectors stocks are at the forefront of innovation and technology, in the local bourse Pro Medicus (PME), Cochlear (COH) and ResMed (RMD) for example have a large technical bias across the product offering and businesses, not old-fashioned healthcare stocks per se.
Also, we should be prepared for AI to significantly impact healthcare stocks—both positively and negatively—depending on how companies adapt and capitalise on the technology:
- Positive: Faster drug discovery, growth in genomics and personalized therapeutics and faster/more efficient data analytics.
- Negative: AI-powered start ups are likely to exert margin pressure on traditional players, or even extinguish them, as the landscape evolves rapidly
This one area of the market where MM is far more comfortable investing in specific stocks due to the diverse nature of the sector.
