Last year, the Health Care Select Sector SPDR (XLV), the largest healthcare exchange traded fund (ETF) by assets, notched its first negative performance on an annual basis since 2008 as investors fretted about the impact of the 2016 presidential election on healthcare equities.

This year, the healthcare sector and ETFs such as XLV are showing last year was just a bump in the road in what has been a lengthy move higher for the group. XLV is up 16% through the first half of 2017 compared to a gain of just over 9% for the S&P 500.

Underscoring the strength in the healthcare sector is this data point: five of the top 10 sector ETFs on a year-to-date basis are healthcare funds. Proving that the rally in the group is widespread, those five ETFs include a small-cap fund, biotech ETFs and the high-flying iShares U.S. Medical Devices ETF (IHI). Medical device stocks are extending a lengthy period of bullishness, including 2016 when the group outperformed the broader healthcare space by a wide margin. (For more, see also: Why This Healthcare ETF Is Surging.)

IHI, XLV and other healthcare ETFs have been surging amid a volatile political environment for the sector that has seen the Trump Administration continually take aim at high pharmaceuticals prices and, more recently, the Republican-controlled Senate unveil a possible replacement for the Affordable Care Act (ACA). Still, biotechnology and pharmaceuticals stocks, among others, jumped late last month after the Obamacare replacement legislation was unveiled.

“Favorable elements in the bill, according to analysts, included the elimination of taxes on industry and provisions to stabilize the insurance exchanges set up under former President Barack Obama's 2010 healthcare law,” according to Reuters. (For more, see also: Top 3 Healthcare Stocks for 2017.)

XLV, which has $17.5 billion in assets under management, allocates 55% of its combined weight to pharmaceuticals and biotechnology stocks. XLV is also home to two of the 13 members of the Dow Jones Industrial Average that are up at least 10% year-to-date—Johnson & Johnson (JNJ) and UnitedHealth Group Inc. (UNH).

Some analysts view healthcare as attractively valued while facing some earnings and sales challenges.

“Health Care firms could see the slowest sales and earnings growth since 2013 as uncertainty surrounding health care reform abounds, but the apparent secular declines in Return on Equity from 2014 thru 2018 are a bigger cause for concern. That said, while valuations for the S&P 500 continue to get richer, Health Care trades considerably below its peak of mid-2015 making the sector appear relatively attractive versus the market,” said AltaVista Research in a recent note.

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