Healthcare ETFs Were Left Behind. JPMorgan Sees the Money Coming Back
Key takeaways
- Healthcare ETF flows are reversing, offering a new tailwind for a sector that has underperformed for three years.
- U.S. large‑cap BioPharma YTD gain 22%
- S&P 500 YTD gain 14%
- 2025 BioPharma gain 30%
What happened
J.P. Morgan’s latest U.S. Large Cap BioPharma report shows a reversal in healthcare ETF flows, with $8.3 billion of year‑to‑date inflows as of Sept. 2, after a period of outflows since 2023.
Why it matters
Healthcare stocks have outperformed the S&P 500 (22% vs. 14% YTD, 30% vs. 18% in 2025), and the sector now trades at a 5% discount to the broader index on next‑12‑month earnings, widening to 15% without Eli Lilly. This suggests room for further upside and a potential shift of capital back into healthcare ETFs.
Short-term and longer-term
Short-term. Short‑term traders should watch the flow data for XLV and VHT, as the $8.3 billion YTD inflow could translate into a 1–2% lift in the ETF’s price if the rotation continues.
Longer-term. Over the next few months, investors can look for a sustained rotation into healthcare ETFs as the sector’s fundamentals improve and valuation discounts persist.