The healthcare sector has picked up strongly over recent months as a significant beneficiary of the rotation out of crowded trades in AI and technology. We believe the mid to long-term trend is also much improved for healthcare as investors start to appreciate a variety of drivers which could support outperformance.
The sector has had an indifferent start to the year but recent performance has been strong with the sector trading on undemanding valuations, a statement underpinned by the relative price-to-earnings ratio (P/E) which is at a discount to the US market.
Healthcare sector’s relative P/E at a discount
Healthcare is seeing positive earnings revisions for 2027 compared to 2026 when the opposite is true for the broader market. This is largely driven by continuing growth in weight-loss and diabetes medicines (GLP-1s) and a recovery in managed care. The Q2 earnings season, so far, has been positive in terms of surprises and upwards revisions to consensus estimates.
Positive momentum
We also see three near-term catalysts to support the sector’s recovery.
The first is innovation, the pace of which continues to accelerate. So far in 2026, there have been 33[1] novel drugs approved by the US Food and Drug Administration (FDA1). This compares to 46 new drugs approved over the course of 2025.
In our view, one of the greatest unmet medical needs is improved access to and delivery of care across the globe. At the same time, the associated budgets – whether government, employer or consumer – are increasingly strained. This is likely to ensure the healthcare marketplace will be a prime beneficiary of new technologies that can not only add value to patients but also drive efficiencies.
The second catalyst is consolidation. Many large pharmaceutical and biotechnology companies will likely turn to mergers and acquisitions (M&A) to bolster pipelines in the hope of sustaining revenue growth as over the next decade some very profitable drugs will lose patent protection. M&A has continued apace since the start of 2026, with a number of significant deals struck at attractive premiums. Recent examples include GSK’s $10.6bn acquisition of oncology company Nuvalent and AbbVie’s $10.9bn acquisition of Apogee Therapeutics.
The third catalyst is increasing utilisation. Healthcare utilisation is experiencing a sustained and meaningful uplift globally. Much of this is driven by demographics as the baby boomer generation reaches 75, the peak age for using healthcare. Evolving patient behaviour is another factor, as well as the continued clearing of pandemic-era backlogs and waiting lists. This is supporting revenue and profit growth across companies in a range of subsectors including healthcare distribution, equipment and facilities.
US elections
Looking beyond dynamics in the sector, another reason for near-term optimism is the approach of the mid-term elections in the US. In the second year of a US presidential cycle, the healthcare sector typically outperforms. The reason in theory is that the market anticipates mid-term results typically going against the incumbent president and the resulting gridlock in Congress means less risk of any adverse policies being passed.
This year’s rebound is slightly lagging the average over the past 50 years but is heading towards the trend level.
The Trust’s positioning
Against this background, the Polar Capital Global Healthcare Trust has broad-based sector exposure. We invest across the market-cap spectrum and see real value in many different subsectors which means we can and do take a highly diversified approach.
The Trust currently has high exposure to biotechnology because of the new product cycles and potential for M&A. It also has a large allocation to healthcare services, specifically diversified US services companies including healthcare insurance, pharmacy benefit and physical pharmacy assets.
Given the strong earnings season, ongoing positive pipeline news flow and the breadth of opportunities we are seeing across a number of healthcare subsectors, we remain optimistic that the recent improved performance in the sector could continue.
Polar Capital Healthcare Team
19 August 2026
Polar Capital Global Healthcare Trust plc (the “Company”)
The Company is an investment company with investment trust status and its shares are excluded from the Financial Conduct Authority’s (“FCA”) restrictions on the promotion of non-mainstream investment products. The Company conducts its affairs, and intends to continue to conduct its affairs, so that the exemption will apply.
The Company is an Alternative Investment Fund under the EU’s Alternative Investment Fund Managers Directive 2011/61/EU as it forms part of UK law by virtue of the European Union (Withdrawal) Act 2018.
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