S&P 500 Healthcare Weighting At Multi-Decade Lows

Earnings season has ended for large-cap biopharma stocks, with steep selloffs across many names as the healthcare sector’s weighting in the S&P 500 falls to a multi-decade low. Pessimism is elevated across the sector amid the Trump administration’s Most Favored Nation (MFN) pricing proposal for Medicaid and the prospect of pharmaceutical tariffs.

A Goldman Sachs team led by Asad Haider told clients Friday that healthcare stocks face weak sector performance and mounting pessimism, as earnings season wrapped up last week.

Here are some of the highlights of the note titled „Global Healthcare: Pharmaceuticals: Friday Fodder: Slimmer Positioning Into The August Lull”:

• Earnings season ended with large selloffs in two key growth names: Vertex Pharmaceuticals (-20.6% on Aug. 4, pain program setback) and Eli Lilly And Co crshed the most since the DotCom era after underwhelming oral GLP-1 pill data.

• This followed earlier 10% to 20% post-earnings drops in other large-cap healthcare „quality” names (Novo Nordisk, McKesson Corp, UnitedHealth Group, Intuitive Surgical).

• Healthcare stocks have moved an average of ą6% on earnings this season … some of the highest volatility on record.

• S&P 500 healthcare weighting now at multi-decade lows.

What’s causing some of the gloom and doom across healthcare stocks?

Well, it’s policy overhangs:

• Investor focus remains on the Trump administration’s MFN pricing proposal for Medicaid and possible pharmaceutical tariffs from ongoing Section 232 investigations (potentially mid-August).

• Administration’s 100% tariff on chips exempts U.S.-based manufacturing, relevant as pharma companies boost domestic production.

• Pfizer first to embed MFN scenarios into guidance; LLY open to gradual U.S. and EU price rebalancing, starting with new products.

Earnings Themes & Stock-Level Notes Winners

Winners

• Johnson & Johnson: strongest post-earnings follow-through in U.S. pharma; remains top YTD performer.

• Gilead Sciences: +6% WTD, +30% YTD; robust HIV franchise momentum and Yeztugo launch.

Losers

• Obesity trade: Novo’s profit warning and LLY’s weak oral obesity pill data drove $100B market cap loss for LLY, partial rebound for Novo; Wall Street analysts trimmed obesity forecasts and PTs.

Top charts

Chart we’re watching…

Here’s Goldman analyst Salveen Ritcher’s big picture view on healthcare:

Big Picture: Although the biotechnology sector has recovered with the broader market since April lows (XBI/NBI/S&P 500 are up ~1/3/2% over the last month), we see the potential for further volatility in 2H+ as policy dynamics (e.g., tariffs/tax policy, drug pricing/Medicaid cuts, FDA/HHS, etc.) evolve. We continue to monitor the administration’s proposal to incorporate MFN pricing into Medicaid, and await a likely announcement regarding pharmaceutical tariffs upon the conclusion of the ongoing Section 232 investigations (potentially by mid-August, per our U.S. economists, although delays are possible), noting pharmaceuticals were excluded from the recently announced US-EU trade deal (establishing a 15% baseline tariff rate for most EU imports) pending Section 232 investigation conclusion.

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