Are beaten-down healthcare stocks a dip-buying opportunity, or an old-fashioned value trap?

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Market musings

A general adage of life goes something like this: If something seems so good to be true, it probably is.

This same dynamic often plays out in the market. A stock — or an entire sector — can look so incredibly undervalued that you wonder why everyone isn’t pouncing on it. But a lot of the time, that valuation is depressed for a reason, and any expected rebound fails to materialize. Turns out it was priced correctly. This is known as a “value trap.”

The healthcare sector finds itself at this crossroads. It’s trailing the S&P 500 by about eight percentage points so far in 2025, and is trading close to a record discount to the benchmark index.

Does this represent a prime buying opportunity, or is it a sinking ship you should steer clear of? Let’s dig in, with a little help from the equity strategy team at Goldman Sachs.

The first element to consider is the role that healthcare stocks have traditionally played in the market. They are usually viewed as a defensive trade — a place to hide out during a difficult macro landscape. To the contrary, when economic prospects are bright, healthcare tends to underperform. The fact that we’re in the middle of a stimulative Fed-easing cycle helps explain why the group has lagged.

Strike one.

A second consideration is how the AI trade has impacted healthcare. While the space is seen getting an eventual boost from productivity gains, Goldman notes that its correlation with the red-hot Nasdaq 100 has declined. As long as AI-fueled gains keep driving the market to new heights, healthcare seems doomed to lag.

Strike two.

An additional piece is the strength of earnings revisions. Healthcare has seen weak breadth in this regard lately, and has been trailing revisions for the broader S&P 500. (Note how low the dark blue line below is, relative to its light blue counterpart.)

Strike three.

But let’s not throw healthcare out yet. Goldman says that there are still individual stock-picking opportunities in healthcare, if you know where to look.

The firm ran a screen for the entire sector, looking for stocks that: (1) trade at a valuation discount and, perhaps most crucially, (2) have made positive earnings revisions.

Here are its top five picks, ranked in decreasing order of three-month revisions to 2026 earnings.

So there you have it. The five least value-trap-y healthcare stocks in the market right now, according to Goldman. Now you can invest in the sector in peace.

If reactions to Olympic medal counts are any indication, Americans don’t like to be anywhere but first place on any list.

Well, hopefully they don’t get Goldman Sachs research (or read First Trade), because the chart above shows the US in dead last. It reflects the firm’s annualized return forecasts over the next 10 years for five different global geographies.

Goldman says US underperformance will be driven by a few things:

1. Valuations are just too darn high. This has been informing the weakness seen in mega-cap tech over the last couple of weeks.

2. Earnings growth is close to maxed out, and can only go down from here, and

3. Global earnings growth will be stronger over the next decade

• Deglobalization is challenging America’s economic future. And Moody’s economist Mark Zandi says even AI can’t offset it.

• Palantir CEO Alex Karp’s favorite word. “Ontology” is a philosophical term that comes up on company conference calls and in SEC filings, and is the name of one of Palantir’s key technologies. Here’s what it means when Karp says it.

Business Insider’s Will Edwards highlights investing recommendations pegged to the biggest trends in markets.

There’s plenty of both exuberance and skepticism around the AI trade right now. One way to play both sides of the coin? The financials sector.

That’s according to Tom Essaye, founder of Sevens Report Research. He told Business Insider that while the sector is insulated from a potential AI bust, it also stands to benefit from the technology’s current capabilities.

“Can they get an AI agent to do their phone tree that’s better than it is now? Can they have an AI agent assist with money transfers, do fraud prevention,” Essaye said. AI wouldn’t necessarily make them more money on lending, but would help in “reducing back office costs,” he said, therefore boosting profits.

Plus, more Federal Reserve rate cuts appear to be in the pipeline, which Essaye said will be good for banks in particular. While lower rates mean banks collect less interest on their loans, they also mean more people are willing to borrow.

“Interest rates coming down will help them over time because it should potentially boost loan demand, including on mortgages,” he said.

The Financial Select Sector SPDR Fund (XLF) and the Vanguard Financials ETF (VFH) are two funds that offer exposure to financial stocks. So far this year, the sector has returned 11%, underperforming the broader S&P 500, which is up 16%.

— Will Edwards

Joe Ciolli, executive editor and anchor, in Chicago. Akin Oyedele, deputy editor, in New York. William Edwards, senior reporter, in New York. Steve Russolillo, chief news editor, in New York. Huileng Tan, senior reporter, in Singapore.

Read the original article on Business Insider