Why Healthcare ETFs Are Outperforming
Canadian healthcare ETFs posted steady gains last week as investors rotated into defensive sectors, with strong performances from both broad healthcare and biotech funds.
The healthcare sector, both in the US and globally, has captured market attention in November 2025, delivering resilient performance in the face of broader equity volatility and sector rotations. Here’s a concise update on the latest moves, with referenced facts for every assertion.
A Defensive Surge Amid Market Turbulence
Global healthcare stocks have notably outperformed wider equity indices in recent weeks as investors rotated out of high-valuation technology and AI plays. The healthcare sector’s appeal for stable earnings and defensive characteristics made it a preferred destination, especially as concerns about an AI bubble grew.
US healthcare equities, in particular, led the charge. Biotechnology and pharmaceutical giants such as Eli Lilly posted strong gains, driven by pipeline breakthroughs, robust demand for obesity and diabetes therapies, and favorable regulatory news. Stocks like Johnson & Johnson, AstraZeneca, and Novo Nordisk also stood out due to high free cash flow, expanding global reach, and innovation in areas like immunology, oncology, and rare diseases.
Innovation, Valuations, and Strategic M&A
Key industry catalysts shaping recent outperformance include:
- Strong pipelines of innovative drugs and therapies—Eli Lilly and Novo Nordisk each expanded diabetes and obesity treatment ranges, supporting revenue momentum despite competitive pressure.
- Large-caps are generally trading at compelling valuations, with the US sector’s average forward P/E well below that of technology and the S&P 500, enticing global investors to increase allocations.
- Worldwide, strategic acquisitions and partnerships, especially in biotech and medical devices, boosted long-term growth prospects. AstraZeneca benefited from an expanding portfolio in oncology and rare diseases, while Johnson & Johnson’s strong cash flow enabled acquisition-driven innovation.
Institutional Trends and Sector Flows
Institutional data confirms heavy flows into healthcare ETFs and sector funds throughout November. The shift outpaced other defensive segments, reflecting widespread sentiment that healthcare offers more attractive risk-adjusted returns as the global macro picture remains uncertain. Notably, diverse revenue streams and strong operational leverage helped the sector withstand supply chain and regulatory challenges better than most.
Policy and Global Catalysts
Global markets also responded positively to clarity on major regulatory fronts:
- In the US, new Medicare drug price negotiations and reforms around telehealth expanded potential addressable markets for multiple names.
- Major players like Johnson & Johnson and Merck leveraged large cash positions to drive innovation even in a mixed macro environment, while companies with pure international focus (AstraZeneca, Novo Nordisk) continued aggressive international expansion and outperformed despite local currency risks.
How Did Canadian Healthcare ETFs Perform Last Week?
Canada-listed healthcare ETFs posted broadly positive performance last week, aligning with global strength across the sector. Here are the standout movements:
- BMO Equal Weight U.S. Health Care Index ETF (ZUH) led diversified healthcare funds with a +2.54% WTD gain.
- First Trust NYSE Arca Biotechnology ETF (FBT) was the strongest performer overall at +3.84% WTD.
- iShares Global Healthcare Index ETF (XHC), Middlefield Healthcare Dividend ETF (MHCD), CI Global Healthcare Leaders Index ETF (CHCL.B), and TD Global Healthcare Leaders Index ETF (TDOC) all delivered weekly gains between +1% and +2%, contributing to broad sector strength.
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Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
