Market Trends and Sector Insights

Since I entered this field back in 1997, I’ve focused on analyzing data to observe stock market trends, especially across different sectors. My initial role was as a research assistant for a small independent firm that specialized in investment and sector analysis for hedge fund administrators. In 2003, I became a partner at that firm but eventually ventured out to create my own tools for ranking stocks and sectors.

For quite some time, my research has helped asset managers discover new stock opportunities and make informed decisions on whether to increase or decrease their exposure to certain sectors. Right now, Limelight Alpha is hard at work analyzing data. This summer, healthcare has shown a significant rally, perhaps unexpectedly.

This past summer, healthcare stocks didn’t really shine. They lagged behind for much of the season. At one point, large cap stocks were outperforming both healthcare and technology sectors, marking a shift in market dynamics.

Unless you’ve been out of touch, you probably know how influential technology has been lately. I have a vested interest here, as I’ve invested quite a bit myself. Following the launch of ChatGPT in 2022, a lot of attention shifted to tech stocks like Nvidia, which caused the technology sector to dominate the S&P 500, pushing healthcare stocks down.

This means investors found themselves holding numerous tech stocks as we moved into 2026, but not enough in healthcare. It’s something worth contemplating as we head into the new year.

Healthcare stocks have been gradually recovering since June 2025. The sector has accounted for 34.4% of the total S&P 500, primarily fueled by technology gains. However, this figure shoots up to around 50% when you factor in major communications companies like Meta and Alphabet.

Unlike the late 1990s internet boom, I don’t think it’s time to panic over tech stocks. As opposed to that previous era, when companies expanded aggressively without solid demand, current infrastructure investments seem well placed. I mean, everything built so far appears fully utilized.

In a recent report, a firm noted that today’s data center cycle is fundamentally distinct. There are long-term contracts with major tech firms in place, and capacity, power, and land are key constraints for growth. Current rates of data center uptake suggest no signs of overexpansion, which is rather reassuring.

That said, after three years of considerable profit, it wouldn’t be shocking if tech stocks needed to take a breather, giving way for other sectors, like healthcare, to receive some attention.

The model I put together evaluates around 1,600 stocks by sector and industry, ranking them based on a set of scores. These scores take into account both fundamental and technical analysis factors, emphasizing income and momentum trends.

Despite facing some headwinds, factors seem to be aligning favorably for healthcare. Regulatory pressures regarding drug pricing and insurance details have shifted in a way that may now benefit the industry.

Previously concerning issues have somewhat eased, especially with support from major pharmaceutical companies avoiding burdens that would crush profit margins. Companies like Eli Lilly are seeing significant demand, which is promising for them.

Other key players, including Amgen, Johnson & Johnson, and Merck, have also been performing well recently.

Some healthcare stock returns since June 30, 2025:

It’s not just the giants leading the charge. The biotechnology sector, which has struggled over the last ten years, is starting to gain traction as well. It seems financial managers and investors are recognizing that if regulatory concerns have been overrepresented in stock prices, there could be real opportunities ahead.

Speaking of numbers, since June, the iShares Biotech ETF has jumped by 33.4%, while the SPDR S&P 500 Biotechnology ETF rose by 35.4%. In comparison, the SPDR Technology ETF is up only 13.7%—far outpaced by the healthcare sector’s 14.9% gain during that same period.

I spend a lot of time focused on healthcare, having written extensively about stocks in this arena and even hosting a popular podcast on the subject before joining TheStreet.

In uncertain economic times, investors typically gravitate toward safer assets. With the current economy showing some strength, the GDP is predicted to grow by 3% in the fourth quarter, according to the Atlanta Fed’s GDPNow Tool.

• Adjusting portfolios to normalize weights.
• Seeking diversification to mitigate risks post substantial gains.
• Believing that regulatory risks have become overblown.
• Looking for increased potential for mergers and acquisitions.
• Benefiting from lower interest rates that can enhance profit margins.

While the uptick in healthcare could pause at any moment, I believe the sector is entering 2026 with enough momentum to merit a place in my portfolio.

Todd Campbell owns stock in Illumina, Johnson & Johnson, and Amgen.