US healthcare sector remains weak this year. Analysts suggest investors may consider buying on dips to prepare for a potential recovery.

Since 2025, the healthcare sector in the United States has been the weakest performer in the S&P 500 index, as if "chronically ill." However, as negative news gradually dissipates, this key defensive sector may be on the eve of a bottoming rebound. Data shows that as of this week, the healthcare sector ETF, Health Care Select Sector SPDR Fund (XLV.US), has fallen by 3.7% year-to-date, far below the S&P 500 index's 7.1% gain during the same period. The ETF covers a wide range of sub-industries from health insurance companies to pharmaceutical companies, and medical device manufacturers. Its diversified structure was originally designed to withstand market volatility, but this year it has been "across the board." Health insurance companies are taking the brunt. Leading companies such as UnitedHealth Group Incorporated (UNH.US), Cigna (CI.US), and Humana (HUM.US) are under pressure due to rising reimbursement costs. Pharmaceutical companies are also facing policy and cost pressures, as the Trump administration continues to push for drug price reforms, Kennedy is restructuring the FDA, and the possible imposition of tariffs have all cast a shadow over the market outlook. Even star companies in recent years, such as the obesity drug giant Eli Lilly (LLY.US), are not immune to fluctuations. The company's latest clinical data on oral GLP-1 weight-loss drugs have disappointed investors, causing the stock price to plummet by 14.14% on Thursday after concerns about increased competition. However, there are also positive signals emerging. The XLV ETF is currently stabilizing around $132.50, close to the $130 technical support level that has attracted buyers multiple times since April. More importantly, the healthcare sector has maintained a long-term uptrend since 2009, which has not been broken. The current adjustment may provide an entry window for medium to long-term investors. Some stocks that have suffered heavy losses are beginning to show signs of recovery. Pfizer Inc. (PFE.US) rose 4% after announcing its financial results on Tuesday, with revenue and profits exceeding market expectations. Merck & Co., Inc. (MRK.US) adjusted due to lower sales than expected, but the stock price has strongly held above the $77 support level. The market generally believes that unless there are more serious negative news, the downside for these stocks is limited. Even more attractive is the valuation advantage. As of now, the forward P/E ratio of healthcare ETFs is only 16 times, significantly lower than the S&P 500 index's 22 times, with a discount of 27%, almost double the average discount level of the past ten years. In terms of growth potential, according to FactSet data, the healthcare sector is expected to achieve an average annual profit growth rate of 11% in the two years after 2025. The driving force behind this growth comes from Eli Lilly's rapid expansion in the obesity drug market, as well as the continuous business performance growth of medical device companies such as Boston Scientific Corporation (BSX.US), Stryker Corporation (SYK.US), Intuitive Surgical, Inc. (ISRG.US), and ResMed Inc. (RMD.US). Trivariate Research's Chief Analyst Adam Parker is bullish on the sector, stating, "The earnings outlook for the healthcare industry is higher than average." He recommends investors to focus on the sector's long-term performance potential.