The Healthcare Sector May Be Turning Bullish — Here's Why It Matters
A sharp spike in Treasury yields, triggered by hotter-than-expected inflation reports and Brent Crude’s rise to $109 per barrel, has put a dent in many high-flying AI-related stocks. Economically sensitive areas were hit even harder, with small-caps, banks, and retailers among the weaker groups.
That’s why I’m on the lookout for opportunities to broaden exposure beyond the market’s current leaders. This would help offset potential volatility if the recent pressure continues.
Let’s take a look at healthcare stocks. The sector is moving higher on the back of a powerful mix of favorable, strong Q1 earnings, improving medical cost trends, and Medicare Advantage reimbursement updates. While not bullish just yet, the sector is on the cusp of regaining its uptrend.
Earlier this month, the Center for Medicare and Medicaid Services (CMS) announced a better-than-expected rate increase for 2027, injecting $26 billion in additional payments into the Medicare Advantage system. That's a direct positive for insurers and providers like UnitedHealth Group (UNH) as it helps remove a major overhang that had weighed on the sector for months.
DaVita (DVA), a specialized healthcare provider focusing on kidney dialysis, is another company that's showing strength. It recently posted a blowout Q1 2026 report, beating earnings estimates and raising its full-year outlook while continuing to buy back shares.
The stock has surged on the news and is now trading near yearly highs.
At the same time, CMS unveiled plans to offer GLP-1 medications Ozempic, Wegovy, and the like to eligible Medicare beneficiaries for just $50 a month. That dramatically widens the patient pool for a drug class that was already reshaping medicine.
Eli Lilly (LLY) is the biggest beneficiary, and they were already on a tear. Their April 30th earnings beat Wall Street estimates by nearly $2 billion, with their growth outlook being revised higher. The FDA's early April approval of Founday (Forglipron), the oral GLP-1 pill with no food or water restrictions, opens the door to new patients who've avoided injections altogether.
While the Healthcare sector is showing signs of life, a broadening out beyond Pharmaceutical and Medical Supply companies would present a more bullish case. Today’s pullback in riskier Biotechs has pushed this group back into a downtrend (using ETF IBB), which may present further headwinds.
If you’d like to be alerted to when there’s a fully bullish bias in Healthcare stocks, use this link here to receive a free 2-week trial of my twice-weekly MEM Edge Report. We not only identify emerging areas in the markets, but we’re also known for uncovering the stocks that go on to become top performers.
You’ll also want to stay on top of what’s taking place in AI-related stocks following Friday’s pullback. Our subscribers have had a front row seat to the sharp gains in leading stocks as we’ve alerted them to buy points in many of these names. Don’t miss out on this opportunity!
Warm Regards,
Mary Ellen McGonagle
MEM Investment Research
