The post A timely diversification opportunity for tech-heavy portfolios appeared com. Key points Healthcare was the best-performing S&P 500 sector over the past month, while information technology was one of the weakest. This divergence may indicate that markets are becoming more selective and are rewarding sectors with resilient earnings profiles. For tech-heavy portfolios, healthcare offers a second growth engine driven by demographics rather than chip cycles, though investors should remain mindful of drug-pricing uncertainty, trial risks, and policy headwinds. A visible rotation: Healthcare outperforms while tech pauses Over the past month, the S&P 500 Healthcare Index gained roughly 8+%, outperforming every major sector, while the S&P 500 Information Technology Index fell by approximately 3-4%. Eli Lilly, Cardinal Health, Regeneron, Biogen, and Merck were among the strongest contributors, with several delivering 20-30% monthly gains. In our opinion, markets have been dominated by AI-driven leadership for much of the past two years, but the recent combination of AI-bubble concerns and rising macro uncertainty-including signs of softer US economic data-is encouraging investors to take a more defensive stance. At the same time, the healthcare sector’s outperformance should be viewed with caution: healthcare faces its own set of risks, including reimbursement pressure, regulatory scrutiny, and trial-driven volatility. This shift does not signal the end of the AI theme. Rather, it highlights a more discerning market environment that demands clearer monetisation pathways and manageable balance-sheet commitments before rewarding AI-linked businesses with further gains. Why healthcare strength makes sense now Earnings resilience is attracting flows Consensus expects S&P 500 healthcare sector earnings to grow 12-15% in 2025, versus 10-12% for the broader S&P 500, according to Bloomberg estimates. Meanwhile, large-cap pharma names such as Eli Lilly and Novo Nordisk have delivered double-digit revenue growth driven by GLP-1 obesity and diabetes treatments. However, this resilience coexists with risks: drug-pricing debates are intensifying ahead of the US election cycle, and several large pharma names face patent expiries in the coming years. In our view, the.