Analysts predict cautious outlook for healthcare stocks as Democrats lead Congress

Healthcare stocks are likely to face a sluggish outlook as Democrats prepare to take control of Congress, according to Jared Holz, a healthcare analyst at Mizuho, who told CNBC’s “Fast Money” on Wednesday that the next couple of years could see little movement in the sector.

Holz said the uncertainty stems from the expectation of gridlock in a divided Washington. With Democrats poised to hold both chambers, he warned that major legislative action on health policy is doubtful. The analyst noted that pharma is now trading at higher multiples than tech for the first time in two decades, prompting him to step back from pharmaceutical names and focus instead on medical‑technology companies. He added that the sector’s “real booster shot” may not arrive until a Democrat wins the White House in 2028, which could reverse many of the policies enacted under the Trump administration.

The State Street Health Care Select ETF (XLV) surged 3 % the day after Election Day, reflecting a brief rally that Holz described as “a very weird situation” where normally unrelated categories moved together. The rally was short‑lived; the ETF ended the week virtually flat and is up about 32 % since President Trump took office in January 2025, outpacing the S&P 500 by roughly nine percentage points. Holz cautioned investors that each subsector within healthcare should be treated differently. He does not expect recent regulations to be overturned soon, but if they are, medical‑device stocks near multi‑year lows could present buying opportunities.

Looking ahead, Holz believes the market will remain cautious until clear legislative direction emerges. Investors with exposure to healthcare are urged to pick and choose individual names rather than blanket holdings. The sector’s performance will hinge on whether Democrats can retain control of the Senate and House and whether any regulatory rollbacks materialize. Until then, the outlook for healthcare equities remains uncertain, and volatility is likely to persist.