Davide Romeo

Since the start of the year, U.S. healthcare stocks are down about 2 percent and roughly 12 percent over the last twelve months. Over the same periods, the S&P 500 is up about 13 percent year to date and 16 percent over twelve months. The disconnect is striking because healthcare remains the third largest contributor to S&P 500 revenue and earnings growth. Street estimates point to S&P 500 EPS growth of about 11 percent in 2025, and about 12 percent for healthcare. To understand why the sector is not getting more love, I spoke with several rating agencies in recent days. A Risk-On Market Is a Headwind for Defensives When the market is in risk-on mode, with growth holding up and the Federal Reserve adding liquidity through rate cuts, defensive sectors often lag. That is part of the current underperformance. Agencies also highlight tariff noise and a cautious near-term outlook that caps upside for the large-cap leaders that dominate sector indices. What Rating Agencies Expe...

The Federal Reserve made its first cut of the year, lowering the federal funds rate by 25 basis points to a range from 4.00% to 4.25%. More revealing than the move itself, policymakers now project two additional cuts by year-end, three in total compared with roughly two a quarter ago. The tone is clearly more supportive. A Board Tilting Dovish Signals from the vote point to a softer stance ahead. One member projected an end-2025 policy rate around 2.75% to 3.00%, which implies several more cuts. With further changes expected on the Board over the next year and a half, the overall posture may continue to lean more accommodative. Source: Federal Reserve Powell Prioritizes Jobs Heading into the meeting, the choice was whether to lean harder against sticky inflation, helped recently by tariffs, or to cushion a cooling labor market. Chair Powell chose to protect employment and guide policy toward a neutral rate near 3%. His remarks emphasized jobs and growth more than inflation, which m...