Investors Playing Defense Via Healthcare Stocks

 | Dec 21, 2021 12:59AM ET

This post was originally published at TopDown Charts

  • Relative strength has shifted to defensive value sectors as global stocks struggle

  • The healthcare sector bounced off relative support and is now back above its 200-day moving average versus ACWI

  • Traders should monitor risk-off trends heading into a year of continued central bank tightening

Defensive sectors are finally showing their luster. Healthcare, consumer staples, and utilities have all seen relative strength in recent weeks as Omicron variant fears permeate global markets.

Is Omicron the Culprit?/h2

Meanwhile, once high-flying areas like technology and consumer discretionary have come under pressure as we head into year-end. While there have been some economic restriction measures taken in some countries and municipalities, perhaps the latest COVID fears are simply an excuse to rotate out of expensive names and into pockets of value.

Monitoring Relative Strength/h3

Our report is sent to clients each Monday. The report covers the spectrum of securities: stocks, bonds, commodities, and currencies. It also dives into breadth readings to help determine the underlying strength of various markets. We eye credit markets and liquidity indicators, too.

Standing out to us right now is something not seen much in recent years: relative strength from defensive sectors. We highlight healthcare this week. The featured chart shows healthcare relative to the All-Country World Index (ACWI) in local currency terms.

Healthcare Finds Support/h2

After being a market leader following the Great Financial Crisis, the sector lost its relative steam starting in 2016. The last five-year period has seen trendless action versus global equities. The sector finds support at 0.4 times ACWI. It bounced off that key level once again a few weeks ago.