Biotech / Healthcare is generally a great sector to be in during an economic downturn as it provides compelling risk / reward.
Here are a few bullets:
The business model for biotech / pharma is very much intact. Secular drivers make demand relative inelastic, especially for life saving medicines.
Note, many cyclical companies across a broad range of sectors are missing numbers and guiding down during 2Q earnings season. Biotech / pharma are in-line and many are raising! This trend will likely continue if a recession deepens.
Many disruptive innovators are creating exceptional upside with clinical and regulatory success. It doesn’t matter how bad the economy is, if a company releases data that changes medical proactive the stock is moving higher!
Funds that can participate in capital markets activity can generate additional alpha. In an environment with a rising cost of capital, primary share transactions that place capital on company balance sheets and remove financing overhangs often generate immediate returns.
The demographic trends for an aging population certainly put forth a compelling rationale for healthcare as well.