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Over the previous yr, the best-performing S&P 500 sector was communication companies, adopted by info expertise. This won’t shock some, however with us now in 2026, I don’t assume both of these two areas would be the greatest place to take a position. Slightly, I believe it could possibly be one other sector that might steal the limelight this yr!
A simple tablet to swallow
My decide for 2026 is healthcare. Final yr, it jumped 12.4%. Healthcare demand isn’t tied on to the financial cycle the best way different sectors are. For instance, client discretionary or industrials are far more depending on how nicely the broader US economic system’s doing. However in the case of drugs, folks nonetheless want care whatever the financial backdrop.
But it’s not only a defensive decide for 2026. The sector’s seeing large-scale breakthroughs that might actually increase associated shares. An enormous one I’m pondering of is the rise of GLP-1 weight problems and diabetes medicine. One other one is making use of AI for sooner and extra correct drug discovery and diagnostics.
Lastly, I believe the valuation’s enticing. The most important healthcare sector ETF has a price-to-earnings ratio of 26.49. This contrasts with the broader S&P 500 common of 31.28. So by fascinated by the place the perfect worth is true now, healthcare once more ranks extremely.
After all, that is simply my view. The sector won’t be the perfect within the index if the AI build-out continues. If investor optimism stays excessive, communication companies (together with Meta and Alphabet) might steal the present. Or if rates of interest fall sooner than anticipated, the true property sector and associated US shares might see massive investor curiosity.
Particular targets
It’s doable to purchase a sector tracker and make investments passively. There’s nothing fallacious with this, however I believe some particular person shares look significantly enticing. Eli Lilly‘s (NYSE:LLY) a superb instance right here.
The inventory’s surged 39% during the last yr, fuelled by demand in GLP-1 merchandise similar to Mounjaro and Zepbound. Income in Q3 elevated 54% versus the identical interval final yr to $17.6bn, with these medicine particularly referred to as out in driving this. Additional, with the potential for far more widespread adoption, a few of the share value improve is predicated on the longer term income potential.
Past weight problems therapies, Lilly has an increasing pipeline in oncology and different therapeutic areas. One other attraction of proudly owning the inventory is the diversification of income. It’s a broad-based healthcare firm, so if the sector as an entire does nicely, Eli Lilly inventory ought to mirror the efficiency.
By way of dangers, there’s rising stress from US regulators to decrease drug prices. This might influence revenue margins going ahead for the corporate.
Even with this concern, I believe it’s a inventory for traders to think about, as a strategy to get publicity to the sector.
