Healthcare just got thrown out with the bathwater. The sector posted its largest weekly outflow since Q1 2020. Over $3.2 billion exited healthcare ETFs and mutual funds in the last five trading sessions. That’s not rotation. That’s evacuation. XLV printed its lowest RSI since 2018. Volume spiked 2.4x above average. Institutions are dumping exposure. Retail is following. But the setup is turning.
Valuations are scraping the floor. Healthcare now trades at 13.2x forward earnings. That’s a 27% discount to the S&P 500. The last time the spread was this wide, XLV rallied 18% in three months. Price-to-book ratios for hospital operators are near 0.9. Biotech trades at 1.4x sales. Managed care sits at 11.7x earnings. These aren’t speculative multiples. They’re recession-level discounts.
Local voices are watching. Chicago desks flagged the divergence between healthcare and staples. Miami traders say the outflow is “pure fear, not fundamentals.” New York macro desks are tracking the spread between XLV and XLP as a mean-reversion signal. The last time it hit this level, healthcare outperformed by 600 basis points in 60 days.
When a whole sector is at all time low valuations relative to the market (0th percentile) it should be of interest to all investors (table from GS) pic.twitter.com/UELMapMUxI
— Marko Kolanovic (@markoinny) July 21, 2025
BREAKING 🚨: Healthcare Stocks
Healthcare Stocks just saw their biggest weekly outflow in more than 5 years 👀 pic.twitter.com/tD7FtDHMyb
— Barchart (@Barchart) July 21, 2025
Healthcare is in pure panic territory. pic.twitter.com/3eDXV89RqG
— THE SHORT BEAR (@TheShortBear) July 19, 2025
Bullish case is stacking. Aging demographics are locked in. Medicare Advantage enrollment hit 33 million in June. That’s up 8.4% year over year. GLP-1 drugs for obesity and diabetes are scaling. Novo Nordisk and Eli Lilly are printing record revenue. AI diagnostics are cutting costs. CVS and UnitedHealth are expanding virtual care. Hospital volumes are rising. Elective procedures are back. Telehealth is sticky. And the sector still pays dividends.
Bear case is narrow. Regulatory risk is real. Drug pricing caps could hit pharma margins. Medicaid reimbursement changes are squeezing hospitals. Labor costs are up. Cybersecurity premiums are climbing. But those are known risks. They’re priced in. What’s not priced in is recovery.
Watch HCA, UNH, and TMO. All three are trading below historical averages. HCA posted 15% EPS growth last quarter. UNH beat earnings and raised guidance. TMO is expanding into China despite macro headwinds. Sarepta and TransMedics are oversold. RSI under 30. Volume rising. Setup is clean.
This is where the game flips. Panic selling creates asymmetric entries. Healthcare is in pure fear mode. That’s when you buy. Not when it’s safe. Not when CNBC tells you it’s time. When it’s ugly. When it’s quiet. When it’s cheap.
Sources
https://www.zacks.com/commentary/2599247/hospital-market-may-be-sick-but-these-4-stocks-are-healthy
https://www.winvesta.in/blog/us-healthcare-stocks-2025-outlook
https://www.fool.com/investing/2025/07/16/this-once-dominant-healthcare-stock-down-__-is-fin/
Disclaimer: This is not financial advice.