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Will Healthcare Overtake AI as the Top Investment Theme in 2024?

The discourse around healthcare investment in 2024 is nuanced, driven by a deeper understanding of the sector's intrinsic value, its resilience in the face of macroeconomic and geopolitical tumult, and its unparalleled capacity for innovation that addresses some of the most pressing global health challenges.
Healthcare forward looking earnings 2024

The preceding year bore witness to the meteoric rise of AI as a dominant force in investment narratives, captivating the imagination of investors with its transformative potential across industries. Yet a compelling narrative unfolds, positioning the healthcare sector not merely as a contender but as a potential frontrunner in the investment arena. 

The onset of this narrative is rooted in a fundamental reevaluation of the healthcare sector’s role amidst a landscape perennially captivated by the allure of technological innovation. Historically characterized as a defensive bastion within the investment portfolio, healthcare is on the cusp of a renaissance, propelled by groundbreaking advancements that challenge its traditional confines.

The discourse around healthcare investment in 2024 is nuanced, driven by a deeper understanding of the sector’s intrinsic value, its resilience in the face of macroeconomic and geopolitical tumult, and its unparalleled capacity for innovation that addresses some of the most pressing global health challenges.

Central to this discussion is the paradigmatic shift heralded by the advent of GLP-1 class drugs, a development that not only underscores the sector’s innovative prowess but also its pivotal role in addressing the burgeoning obesity epidemic—a public health crisis with profound societal and economic implications. This leap in therapeutic intervention, epitomized by the clinical success and market enthusiasm surrounding treatments developed by Novo Nordisk and Eli Lilly, serves as a beacon of the healthcare sector’s potential to drive transformative change, marrying societal impact with substantial investment returns.

Beyond the immediate impact of pharmaceutical innovations, the sector’s trajectory in 2024 is influenced by a constellation of factors, including demographic shifts, regulatory landscapes, and the integration of AI and other technologies that enhance efficiencies and patient outcomes. This multifaceted perspective reveals a sector that is not only resilient in the face of uncertainty but also dynamic, poised to capitalize on the intersection of technology and healthcare to forge new pathways in treatment and care.

Let’s dive in …

2024 Global Healthcare Outlook

The landscape of global healthcare investment is undergoing a pivotal transformation as we move into 2024, a transition underscored by the nuanced interplay of market dynamics, technological advancements, and evolving investor strategies within the sector. 

The year 2023 served as a watershed, challenging yet redefining, for healthcare investment, setting the stage for what promises to be an invigorated pursuit of opportunities within this domain in the forthcoming year.

In 2023, the healthcare sector found itself navigating a complex environment, characterized by a general underperformance relative to the booming sectors of technology and communication services. This period, however, was not devoid of its silver linings; it heralded a return of increased dispersion within the healthcare sector itself, unveiling substantial alpha opportunities for astute investors. 

This divergence in performance was particularly pronounced within the pharmaceutical sub-sector, which experienced a stark bifurcation. On one end of the spectrum, the GLP-1 class of drugs emerged as a formidable force in weight loss treatment, propelling leading developers such as Eli Lilly and Novo Nordisk to significantly outpace their peers. On the other, the aftermath of the COVID-19 pandemic dealt a severe blow to many companies, as the ephemeral boon of vaccine and therapeutic revenues in the preceding year left challenging year-over-year comparisons.

The medical device and supplies sub-sector presented a narrative of initial gains obliterated by market reactions to clinical trial outcomes, particularly following Novo Nordisk’s announcement of the GLP-1 SELECT trial results. This announcement precipitated a sweeping sell-off, underscoring the volatile nature of market sentiment and its immediate impact on sector performance.

Amidst rising interest rates, the biotechnology sub-sector sustained a marked decline, with several indices plummeting to multi-year lows. The providers and services domain, too, could not entirely evade the reverberations of the pandemic’s long shadow, grappling with fluctuating utilization trends and escalating medical costs. Conversely, distributors experienced a semblance of stability, buoyed by improving fundamentals and a diminishing overhang from opioid litigation.

Looking ahead to 2024, the article posits an optimistic outlook for healthcare investment. The sector stands on the precipice of what could be a compelling rebound, driven by favorable risk-reward dynamics. The aftermath of 2023’s tumultuous course has arguably set the stage for an attractive entry point into the sector, with the MSCI World Healthcare index trading at a notable discount relative to the broader market. This valuation gap, coupled with expected sector-leading forward earnings growth, presents a fertile ground for investment, potentially heralding a year of robust performance and strategic realignment towards healthcare.

Key themes poised to define the sector’s trajectory include the ongoing evolution of GLP-1 drugs, pivotal developments in medical devices and supplies influenced by GLP-1’s clinical outcomes, and the broader implications of technological advancements on healthcare delivery and investment. The pharmaceutical industry, in particular, is at the cusp of significant transformation, driven by innovations in obesity and diabetes treatment, as well as the impending impact of patent expirations on market dynamics.

Read the full article here.

Healthcare Resilience in a Turbulent 2024

In the face of looming global uncertainties and the lingering aftershocks of a tumultuous market environment, the healthcare sector emerges as a bastion of resilience and potential growth for investors navigating the choppy waters of 2024. 

Richard Saldanha, with a decade of stewardship over Aviva’s Global Income Fund, articulates a compelling narrative for healthcare investment in the forthcoming year, positioning it alongside consumer staples as sectors primed for resurgence in a landscape where technology stocks, propelled by the AI-driven fervor of 2023, have dominated market discussions.

The backdrop to this reassessment of sectoral priorities is a market that, in 2023, witnessed the meteoric rise of the ‘Magnificent Seven’—a cohort of technology giants including Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia, and Tesla—that significantly contributed to the overall return of US equities. This trend, largely fueled by advancements in AI, led to an inadvertent sidelining of the healthcare and consumer staples sectors, despite their consistent performance and fundamental value proposition.

The investment thesis for healthcare in 2024 is further bolstered by the sector’s potential to benefit from the continued evolution and integration of AI technologies. 

While the previous year’s market dynamics were significantly influenced by AI’s direct impact on technology stocks, Saldanha underscores the expansive role AI is poised to play across various industries, including healthcare. This broadening of AI’s applicative horizon heralds a paradigm where healthcare could see enhanced efficiencies, novel therapeutic modalities, and improved patient outcomes — factors that collectively underscore the sector’s investment appeal.

Saldanha’s discourse extends beyond the immediate prospects of AI in healthcare to encompass a broader view of the infrastructure and energy sectors, highlighting the interconnectivity of investment opportunities in an increasingly digital and electrified world. The mention of data centers and ageing electrical grids underscores the foundational elements required to support the expansive growth of technology, including healthcare innovations predicated on data-intensive AI applications.

Within the granular narrative of healthcare’s investment potential, there lies an implicit acknowledgment of the sector’s capacity to adapt and thrive amidst technological and macroeconomic shifts. 

The emphasis on resilience — both in the context of enduring market appeal and in the strategic pivoting towards sectors that promise stability and growth — resonates as a core theme. 

This resilience, interwoven with the sector’s adaptability to incorporate AI and other technological advancements, sets the stage for healthcare to be a critical component of investment portfolios in 2024.

Read the full article here.

Will Healthcare Overtake AI as the Top Investment Theme in 2024?

In the shadow of AI’s dominance as the investment narrative of 2023, the healthcare sector emerges, not just as a contender, but potentially as the leading theme for investors in 2024

Cherry Reynard’s exploration interrogates this pivot, spotlighting groundbreaking advancements in healthcare that beckon a reevaluation of the sector’s traditional characterization as conservative and defensive. This narrative unfolds against a backdrop where AI, despite its transformative impact across sectors, may cede its spotlight to healthcare, thanks to a series of innovations that promise to redefine both the sector’s trajectory and its appeal to investors.

The burgeoning interest in GLP-1 class drugs is emblematic of a broader trend within the healthcare sector, where the intersection of innovation, patient need, and economic viability presents a compelling narrative for investors. The global obesity crisis, with its dire implications for public health and its attendant economic costs, estimated to potentially reach $4 trillion annually by 2035, places a spotlight on the urgent need for effective interventions. The healthcare sector’s response, marked by rapid advancements and significant market enthusiasm — as evidenced by the surging share prices of Novo Nordisk and Eli Lilly — illustrates the sector’s capacity to drive both societal impact and investor returns.

Reynard’s exploration extends to the macroeconomic and regulatory contexts that frame the healthcare investment landscape. With healthcare spending poised to escalate, driven by demographic shifts and the escalating burden of chronic diseases, the sector stands at the forefront of critical areas for investment. This is further compounded by the regulatory environment, which, despite the potential for policy shifts, offers a relatively stable backdrop for the sector’s continued evolution and growth.

Read the full article here.

The discussions encapsulated within the preceding summaries illuminate a sector in flux, characterized by significant innovation, regulatory shifts, and evolving market dynamics that collectively forge a compelling case for healthcare as a cornerstone of investment portfolios in the upcoming year.

The transformative potential of healthcare, catalyzed by groundbreaking advancements in treatments for obesity, diabetes, and other pervasive health challenges, positions the sector not merely as a defensive stalwart but as a proactive driver of growth and societal impact. The ascendancy of GLP-1 class drugs, as exemplified by Novo Nordisk and Eli Lilly, underscores a pivotal moment in healthcare — where innovation meets urgent public health needs, thereby opening avenues for substantial investment returns. This confluence of factors heralds a renaissance in healthcare investment, urging investors to recognize the sector’s robust potential beyond its traditional boundaries.

Moreover, the nuanced integration of artificial intelligence and other technological advancements within healthcare further enhances the sector’s appeal, offering novel pathways for improving patient outcomes and operational efficiencies. 

This synergy between technology and healthcare not only broadens the horizon of investment opportunities but also emphasizes the sector’s capacity to adapt and thrive amidst rapid technological evolution.

The strategic realignment towards healthcare, underscored by the articles discussed, is not merely a reaction to the sector’s current dynamics but a proactive acknowledgment of its future potential. 

Until next time,

The Longr Reads Team

“Investment in health is not just spending. It’s an investment in human capital and future productivity.”

Jim Yong Kim, Former President of the World Bank

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