From the studio

Podcast: Signal over Noise | What US history tells us about AI capex, on Apple and Spotify (8 mins)

Video: Investors Club | Oil, US dollar, AI cycle, and China tech (10 mins)
Video:Top of Mind in Asia Pacific | Min Lan Tan: Asia's second-half outlook (7 mins)

Thought of the day

Last week’s market action hinted at a broadening away from the narrow AI leaders that have dominated returns. Major tech-heavy indices posted sharp weekly declines, led by the Philadelphia Semiconductor Index's 7.94% decline, while the Nasdaq was down 4.6% and the S&P 500 1.95%. By contrast, the S&P 500 health care sector rose 7.90% on the week, its best weekly gain in four years, while Europe’s Stoxx 600 Health Care index climbed 5.77%.

The move fits a pattern we have observed over the past year, in which health care has outperformed the S&P 500 on 85% of the days when the benchmark fell 1% or more. The sector is also benefiting from investor hunger for breadth, with the equal-weighted S&P 500 index gaining 1.58% last week, heavily outperforming the cap-weighted index.

Even after this rally, health care still trades at close to a 3% discount to the broader market (MSCI ACWI), compared to the 10-year average of a 5% relative premium, despite stabilizing earnings expectations. Without taking any single name views, we anticipate a run of positive catalysts that could help health care stocks trade even higher in the weeks and months ahead:

US coverage expansion should lift volumes. Medicare coverage is a meaningful near-term demand catalyst. Forecasts vary, but Eli Lilly estimates that around 20 million Medicare patients may newly qualify for obesity-drug access through the 1 July coverage expansion. We have been highlighting broader coverage and access expansion in obesity and diabetes as an important sector driver, and we think improved reimbursement should make demand more predictable for manufacturers and the wider ecosystem.

Oral therapies will bring in more first-time users. The strong weight-loss effects of GLP-1s have helped offset the inconvenience and hesitation often associated with injectables. But the arrival of oral therapies should lower barriers to adoption and bring in new users. Early reports suggest most new Wegovy pill prescriptions are coming from people new to GLP-1 therapy, rather than from patients switching from injectables. And this is not just a US story: Approval in the UK opens the door to the European market, with more approvals likely in the months and quarters ahead, in our view.

Generics should broaden the market, too. The launch of generic semaglutide (the active pharmaceutical medication in GLP-1 agonists that help regulate hunger and blood sugar) outside the US may lower costs and expand access, rather than simply erode value. In ex-US markets where penetration remains below 2%, cheaper options could bring more price-sensitive patients into treatment, while branded next-generation therapies still command a premium for stronger efficacy and broader benefits. A larger treated population could also reinforce long-term innovation across the category.

So, we think the recent rotation into health care may prove more than a short-lived defensive move. We continue to rate the sector as Attractive, acting as both portfolio ballast and offering structural growth exposure, supported by aging demographics, improving pharmaceutical sentiment, and this anticipated step-up in obesity-treatment adoption. For investors, this argues for maintaining or adding diversified exposure to health care, including both medtech and pharmaceutical companies. This latter aspect of health care is also closely linked to our Longevity theme, one of three Transformational Innovation Opportunities (TRIOs), alongside Artificial Intelligence and Power and resources. As lifespans extend and populations age, we see Longevity as a powerful driver of demand not only in health care, but across a wider ecosystem over time.