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iShares Global Healthcare ETF (IXJ)
https://www.blackrock.com/au/products/273430/
This product is likely to be appropriate for a consumer:
• who is seeking capital growth
• using the product for a core component of their portfolio or less
• with a minimum investment timeframe of 5 years, and
• with a high to very high risk/return profile
Global healthcare led sector performance in Q4 2025 amid policy optimism and a defensive stock preference. With US drug price uncertainty mostly resolved, can strong fundamentals boost healthcare growth in 2026?
Key takeaways
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01
Global healthcare was an unloved sector for most of 2025, but outperformed in the final quarter, while global investor flows to the sector reached their highest level in five years in November
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02
The policy uncertainty that hung over the sector last year has now largely resolved, with President Trump’s Most Favored Nation executive order spurring major drug companies to negotiate deals on medication pricing and investor focus swinging back to the sector’s strong innovation pipeline
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03
Aside from the medium-term investment case, global healthcare can also offer diversification benefits to investor portfolios, as well as helping build resilience within global equity allocations during market downturns
The opportunity in healthcare
US policy uncertainty saw valuations in healthcare suppressed at near 30-year lows in 20251, but the sector was a late beneficiary to the rotation into defensive stocks in the final quarter of the year, helping to turn around performance.
As seen below, healthcare led all global sectors in Q4 - gaining more than 10% after President Trump’s Most Favored Nation executive order prompted pharmaceutical giants such as Pfizer and Eli Lilly to negotiate pricing with the White House and helped to resolve uncertainty over US tariff policies.
Global sector performance, Q4 2025
Source: BlackRock Investment Institute/LSEG Datastrea. Indicates quarter-to-date performance as of 19 December 2025
Locally, the iShares Global Healthcare ETF (IXJ), which tracks the S&P 1200 Global Healthcare Index, returned 12% in the three months to November 2025, significantly ahead of its long-run average annual return of 6% since inception.2
Clear policy direction, alongside investor concerns regarding a possible technology sector bubble in the United States, prompted significant movement into healthcare investments toward the end of the year. In November 2025, healthcare ETFs experienced their largest monthly global inflows in five years, attracting US$6.8 billion across the industry.3
With clarity now emerging for what has recently been an unloved sector, we see an opportunity for investors to refocus on the positive fundamentals and long-term supportive trends that may propel healthcare forward in 2026.
From laggard to leader
As the chart below demonstrates, 2025 was a rollercoaster ride for healthcare sector performance. Unlike many sectors that recovered quickly following April’s ‘Liberation Day’ tariff announcements, policy uncertainty around pharmaceutical trade barriers meant healthcare performance continued to lag.
Global healthcare 2025 sector performance
Source: BlackRock and Factset as of 24 November 2025, based on year-to-date performance of the MSCI World Healthcare Index to 24 November 2025. 4 Source BlackRock and Factset as of 24 November 2025, based on MSCI World Healthcare Index returns. 5 Source BlackRock as of 26 November 2025. Note MFN = Most Favoured Nation
Underperformance peaked in August, when the sector was trading at a 30% discount to global equities – the lowest levels since the unveiling of Obamacare reforms in the US in 2009. Following the US administration’s Most Favoured Nation (MFN) initiatives, however, performance began to turn around.
The MFN framework centres on three objectives – preferential pricing for drugs on the US government’s low-income Medicaid program, implementing direct-to-consumer sales through a new Trump administration website, and guaranteeing that new drugs will not be launched at cheaper prices in markets outside the US.
Drug companies are able to individually negotiate deals with the administration that fit these terms, with several already announced as per the chart above. Negotiations have also typically involved expansion of US production capacity for pharmaceutical companies, and in exchange the US government has agreed three years of tariff relief for the industry.
With a reasonable deal now agreed for pharmaceuticals, focus has shifted back to positive innovations taking place across the industry. This is where BlackRock’s long-term investment ‘mega forces’ come into play, with healthcare standing to benefit from demographic change in particular as developed economies age and chronic health conditions become an increasing economic issue to solve.
GLP-1 obesity management drugs have been the standout innovation in recent years, with 13 million more Americans now eligible for government subsidies on these medications following their inclusion in the US Medicare program.4 Continuous glucose monitors are another recent innovation of interest in the diabetes management space, with the total global addressable market for the devices projected to expand by US$10 billion in the next five years, and more than 500 million adults currently living with diabetes.5
The AI buildout is also having an impact on the medical space, with a recent healthcare summit attended by more than 20 industry CEOs noting that AI is now increasingly being used in hospitals to automate clinical notes, staffing rosters and billing, freeing up staff for more valuable tasks and patient care. Additionally, AI is beginning to transform the medical research field, accelerating drug development from early studies to human trials and market launch.
With healthcare valuations still looking cheap relative to global equities – trading at around a 13% discount despite the recent performance surge6 – now may be the time for investors to consider adding more exposure to the sector.
A dose of healthcare for your portfolio
As well as offering opportunities to tap into innovation and some of the long-term ‘mega forces’ shaping the global economy today, healthcare exposure can provide additional benefits for those looking to build a diversified share portfolio.
Well-known as a defensive sector, healthcare stocks may be less susceptible to the impact of swings in the broader global equity market. In each calendar year over the past decade where global equities have generated negative returns in US dollar terms, the S&P 1200 Healthcare Index has generated a positive return7. If the rotation out of the momentum trade we saw dominate markets for most of 2025 continues, healthcare stocks could potentially benefit.
Additionally, with healthcare less represented in domestic and international equity indices, adding exposure through IXJ can provide more diversification from a sector point of view. As seen in the chart below, the S&P/ASX 200 and MSCI World indices have less than 10% exposure to healthcare, versus a single-sector ETF that allows investors to dial their exposure up or down depending on their market views.
Limited representation in mainstream indices
Healthcare exposure is challenging to access through broad global and domestic share indices
Select GICS Sector weightings, ASX 200 vs MSCI World
Source: S&P/MSCI data as of 30 November 2025
Low-cost access to the sector can also be an advantage, allowing investors to keep more of what they earn from any potential sector gains. With an annual management fee of 0.41%, the lowest of all global healthcare exposures on the ASX, IXJ can provide efficient access to the healthcare innovation theme.
The bottom line
Overall, we see healthcare as able to potentially shrug off the latest era of policy uncertainty in 2026, and with strong fundamentals, reasonable valuations and demand for innovative new products set to expand, recovery in sector performance is likely to continue.
