By Lewis Krauskopf
NEW YORK (Reuters) -Woes for U.S. healthcare stocks have worsened this year driven partly by Trump administration policies, although some investors are betting that the beaten-down shares are now becoming too much of a bargain to pass up.
The S&P 500 healthcare sector — which includes pharmaceutical companies, biotechs, health insurers and medical equipment makers — has slumped 5% in 2025, lagging the over 7% gain for the overall index.
Pressure to bring down U.S. prescription drug prices to overseas rates, tariffs targeted at pharmaceuticals and cuts to areas such as health research funding and Medicaid are among the Trump administration actions clouding the outlook for the shares this year, investors said.
Regulatory obstacles are compounding issues, including expiring drug patents and setbacks for bellwethers including UnitedHealth Group.
“You have got this constant overarching political and regulatory overhang that doesn’t really seem to subside with any administration,” said Jared Holz, healthcare sector strategist at Mizuho Securities. “When you have so much nebulousness around the sector, it turns people off rather than invites them to the party.”
In another sign of the group losing favor, healthcare exchange-traded-funds have seen 12 consecutive months of net outflows as of July for a total outflow of $11.5 billion in that time, more than for any other sector, according to State Street Investment Management.
The performance picture is even dimmer over a longer period. While shares of massive technology companies pushed the benchmark S&P 500 up over 50% the past three years, the healthcare sector is little changed in that time.
That gap has put the 60-stock sector at nearly its biggest discount to the broader market in 30 years, which some investors hope is an inflection point for the battered group.
“The valuation is extremely cheap and the relative performance is at an extreme,” said Walter Todd, chief investment officer at Greenwood Capital, whose healthcare holdings include diversified giant…
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