Could healthcare stocks continue to rally in 2021?

Despite being one of the big winners during the COVID-19 pandemic, global healthcare is predicted to continue to perform strongly over the longer term, an industry expert has said.

While the healthcare sector currently accounts for around 10 per cent of the world’s GDP, or US$11 trillion as at 2018, it is likely to grow further, triggered by ageing populations and widespread chronic disease.

Not only are healthcare expenditures in developing economies expected to rise, but demand for COVID-19 vaccines is predicted to be huge next year, sending investors on a hunt for biotech stock. 

With global GDP projected to grow to US$137 trillion by 2030, and healthcare expenditures forecast to remain at 10 per cent of GDP, this would translate into over US$13 trillion in healthcare spending each year by the decade’s end. 

It was pointed out that the sector has strong growth opportunities outside of the current COVID-19 pandemic. 

The healthcare sector is benefitting from several longer-term trends

Except for a few large ‘young’ countries such as India and Indonesia, ageing demographics is a global phenomenon.

The increasing prevalence of chronic diseases will also continue to drive up the demand for healthcare.

Investors are urged to look into the healthcare sector, despite warning of its complexities.

An allocation to global healthcare is important to get diversified exposure to different healthcare subsectors and companies. But investing in health care is easier said than done.

There are many complexities due to the diversity of the industry, much of which is located offshore, and governed by different legislative frameworks.

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Article reproduced by Nest Egg from Cameron Micallef

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Zac Zacharia (Managing Director) has been assisting clients to create wealth and secure their futures for over 14 years.

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Co-authoring the popular investment book, Property vs Shares.