Healthcare sits near a historic low in market ownership, even as the sector's growth profile strengthens, with 2027 earnings growth expected to trail only tech.
Earnings growth, drug innovation, financing activity, and M&A all point to a sector investing for the future.
Many investors remain underweight healthcare, while favorable seasonality around the midterm elections and emerging AI applications are among several near-term catalysts suggesting the sector deserves renewed attention.
Healthcare is entering a period with dynamics that look very different from those seen in recent years. Several of the themes we highlighted earlier this year have continued to gain momentum, while new catalysts have emerged along the way. Together, they help explain why healthcare may be worth a closer look in the second half of 2026 and into 2027.
Healthcare’s share of the S&P 500 is near a historic low.¹ Since 1990, Healthcare has represented an average of 11.3% of the index and reached a peak weight of 16.6%. Today, it sits below those historical levels, while by contrast Information Technology has more than doubled its long-term average weight of 15.2% to nearly match its historical peak of 38.3%.1
Healthcare and Tech Have Diverged
Healthcare vs. Information Technology: S&P 500 sector weights, 1990–20261
It may surprise some investors that estimates put 2027 Healthcare earnings growth at roughly 23%, trailing only Information Technology's 35%.2
Healthcare Earnings Growth Outpace Every Sector Except Tech
2027E Consensus EPS Growth Estimates
This year, the FDA has cleared 30 novel drugs (through early August), keeping 2026 on pace with the strongest years of the past decade.3 Clinical data has also impressed, especially in oncology. Revolution Medicines' daraxonrasib nearly doubled survival in a pancreatic cancer trial, cutting the risk of death by 60%, offering hope for a notoriously difficult to treat disease.4 Just last week, Merck and Moderna's mRNA vaccine became the first cancer vaccine to succeed in a randomized Phase 3 trial.5
Biopharma financing is also tracking to its second strongest year ever, and the IPO market is on pace for its third strongest year on record.6
2026 Is Shaping Up as One of Biopharma Financing's Strongest Years6
Equity raised, private debt raised in the biopharma sector, 2013 - Jun 30, 2026 (estimated, $ Billions, worldwide)
Broader healthcare ownership is at historically low levels,7 hedge fund exposure is near a record low,8 and ETF flows have recently turned positive.9 Against strong fundamentals, this is a setup worth watching.
The U.S. midterm elections also offer opportunity in the sector. Healthcare has outperformed the S&P 500 by 7.5% on average in midterm election years, with most of that gain concentrated in Q3.10 Biotech's historical edge has been even wider, averaging 15% outperformance in those years.10
Developing a new drug costs roughly $2 billion on average.11 Large pharmaceutical companies have the proprietary data, scientific expertise, and balance sheets to deploy real capital into AI models aimed at narrowing that cost, an advantage few other defensive sectors can match.12
Together, these factors paint a more comprehensive picture of healthcare than one headline narrative alone can offer. They also suggest that the investment case for healthcare extends beyond the areas currently commanding the most attention. Tema's healthcare suite—including our Oncology ETF (CANC), Healthcare AI ETF (HLTH), and Heart & Health ETF (HRTS)—offers exposure to different parts of the healthcare opportunity worth revisiting.