The S&P 500 Health Care Index is a sector-specific subset of the S&P 500, tracking the performance of companies in the index within the healthcare industry. This includes businesses involved in pharmaceuticals, biotechnology, medical devices, healthcare services, and life sciences. The healthcare sector plays a crucial role in the US economy, addressing health challenges and driving advancements in medical science.
S&P 500 Health Care Index Price & Chart
Healthcare is generally considered a defensive sector, as demand for medical products and services tends to remain stable regardless of economic conditions. These characteristics make it a popular choice for investors seeking stability and long-term growth.
The index was launched in 1996 and includes 61 companies featuring household names like Johnson & Johnson, Pfizer, UnitedHealth Group, and Abbott Laboratories.
SP500-35 Performance
2024 was a strong year for the index up until September when it began to decline. That slide continued until the end of the year. However, 2025 has seen the index push higher once again, defying the general market which recently declined due to fears regarding AI.
As of early 2025, the index has delivered the following performance:
| Period | Total Return |
|---|---|
| 1-Year Return | +5.92% |
| 3-Year Return | +4.88% |
| 5-Year Return | +7.73% |
| 10-Year Return | +7.69% |
S&P 500 Health Care Top 10 Companies
The index is rebalanced quarterly in March, June, September and December. The top 10 constituents make up 54.1% of the index.
| Company | Market Cap |
|---|---|
| Eli Lilly | |
| Unitedhealth Group | |
| Johnson & Johnson | |
| AbbVie | |
| Merck | |
| Thermo Fisher Scientific | |
| Abbott Labroratories | |
| Intuitive Surgical | |
| Pfizer | |
| Danaher |
US Healthcare Sector Forecast
The Bull Argument: In its 2025 sector outlook, Fidelity said US health care stocks were “unloved but well-positioned.” Eddie Yoon, a Fidelity sector portfolio manager, acknowledged that health care stocks underperformed in 2024 as investors favoured high-growth tech stocks over more defensive sectors. “After a period of lagging the broad market, valuations across the sector have recently come down to attractive levels, creating some interesting potential opportunities,” he wrote. “At the same time, some of the temporary headwinds that contributed to recent underperformance could be set to abate in 2025.”
Overall, when assessing the sector, bullish factors such as increasing investment in biotechnology, personalised medicine, and healthcare infrastructure may boost the sector. Additionally, a growing focus on aging populations in developed markets could provide sustained demand for medical services and products, while weight loss drugs could also play a significant role.
The Bear Argument: From a general perspective, potential challenges include regulatory uncertainty, particularly surrounding drug pricing reforms in the US. Rising operational costs and supply chain constraints could also weigh on margins. Furthermore, increased competition in certain therapeutic areas might create pricing pressures for pharmaceutical companies.More specifically, investors may be concerned with potential regulations imposed by the new US administration. For example, companies owning pharmacy benefit managers declined on January 29 following news that the introduction of a bipartisan bill would “force health insurers or drug middlemen to divest their pharmacy businesses.”
Our View: ETFs tracking the S&P 500 Healthcare Index provide a stable, growth-oriented investment opportunity for those looking to benefit from a dynamic and innovative sector. While the sector is generally less volatile than cyclical industries, it still offers strong growth potential through advancements in medical research and technology.
Who Should Invest in the S&P 500 Health Care Stocks?
For investors looking for ways to invest in S&P 500 Health Care stocks, ETFs such as the Health Care Select Sector SPDR Fund (XLV) and the iShares U.S. Healthcare ETF (IYH) track the index. These funds may appeal to:
- Defensive investors: Healthcare stocks tend to perform well in both bull and bear markets, offering stability during economic downturns.
- Innovation-focused investors: For those looking to gain exposure to cutting-edge developments in biotechnology, MedTech and medical research, the sector is a solid option.
Long-term investors: Healthcare’s consistent demand and long-term demographic trends make it a solid option for investors with extended horizons.
