Why Healthcare Stocks Just Hit a Record
Healthcare led gains across the S&P 500's 11 major sector indexes on Tuesday, October 20, 2026, and the healthcare sector index (.SPXHC) hit a record, Reuters reported. The S&P 500 tracks 500 large US companies. Its sector indexes group them by industry.
Money has been moving for a while. On October 15, Reuters reported that the S&P 500 had hit a record high the week before and was up about 13% in 2026. Most of that gain came from AI-related stocks. Traders were moving from those names into healthcare. A Reuters video report on Tuesday said the Dow led Wall Street higher as investors favored value stocks, such as healthcare, while technology lagged. Reuters' healthcare index page, as of October 16, said investors were pouring money into U.S. healthcare stocks. They were betting on more deals and attractive prices.
This shift reverses recent leadership. In a July 16 report, MarketWatch said the top five holdings of the XLV healthcare fund had all beaten the S&P 500's 1.7% gain since mid-May. Eli Lilly was up 16.3%, Johnson & Johnson up 10.3%, and AbbVie up 20.9%. XLV is an exchange-traded fund, which is a basket of stocks that trades like a single share.
Expected profits are part of the story. Reuters reported on August 5 that healthcare companies in the S&P 500 were expected to grow profits by double digits, meaning 10% or more, from late 2026 through the end of 2027. Across the whole index, FactSet's Earnings Insight reports that analysts predict 32.8% earnings growth for 2026.
Price matters too. The forward P/E, or price-to-earnings ratio, compares a stock's current price with the profit analysts expect over the next 12 months. Think of it as the price you pay for each dollar of expected profit. FactSet puts the S&P 500's forward P/E at 19.0, below its 5-year average, per its latest Earnings Insight. In late June, a FactSet PDF dated June 26 showed the index at 20.1, and Health Care fell 1.4% that week. A July 10 FactSet PDF put the ratio at 20.5, against a 5-year average of 19.9 and a 10-year average of 19.0. So healthcare has risen while the overall market price for profits has come down. That is part of why some describe the sector as attractively valued.
Deals are the third piece. Bain's Global Healthcare Private Equity Report 2026 says that healthcare private equity, meaning investment funds that buy whole companies, reached a record high in global deal value in 2025. Large transactions drove that total. A CBH report on 2025 trends and the 2026 outlook estimates about $140 billion in transactions and a 45% increase in deal value. In health services, PwC's midyear outlook says physician medical groups took a record 46% of first-quarter 2026 deal volume. It also says eHealth made up 61% of disclosed deal value in the deals it reported.
Forecasts for single companies vary widely. ICR's Q3 update on High-Growth in MedTech, published October 12, reports that analyst estimates for HGMT's revenue growth from 2025 to 2028 range from about 18% to about 57% a year. LSEG publishes a 2026-2028 consensus that shows the highest and lowest estimate each year. That shows how far analysts disagree.
This matters for anyone with savings in the market. For a saver or pension fund, the sector's appeal depends on three things holding at once. Earnings need to keep growing by double digits. Deals need to keep pushing valuations up. And the P/E ratio needs to stay below its recent averages. Each of those is a forecast, and each can change. A move driven by investors leaving a crowded trade can reverse as fast as it started. A record shows where prices have gone, not where they will end up. The next earnings season will test whether these numbers hold.
