Time to rotate? Energy hits a historic valuation gap vs. healthcare

2026-05-28 09:47:07 ET

The S&P 500 energy sector ( XLE ) is now trading at a higher valuation than healthcare, a rare reversal that some investors see as a potential signal to rotate toward beaten-down healthcare stocks....

A chart posted by Jeff Weniger, head of equity strategy at WisdomTree, showed the price-to-sales ratio for S&P 500 energy companies recently moving above that of the healthcare sector for one of the few times in the past two decades.

The chart compared the valuation gap between the two sectors alongside the relative performance of energy versus healthcare stocks dating back to 2005.

Weniger said the current setup suggested investors should consider shifting capital from energy into healthcare, arguing energy valuations had become unusually elevated relative to the historically out-of-favor healthcare sector ( XLV ).

The strategist noted that energy rarely traded at such a premium to healthcare over the last several decades, highlighting the unusual nature of the current market positioning.

The move followed a prolonged stretch of strong relative performance for energy shares, supported by higher oil prices, supply constraints, and geopolitical tensions tied to the Middle East. Healthcare stocks, meanwhile, lagged amid concerns over drug pricing, regulation, and slower earnings growth across parts of the sector.

The chart also suggested prior periods when energy valuations moved sharply above healthcare were eventually followed by reversals in relative performance, though Weniger cautioned investors to remain mindful of long-term time horizons

Here is the chart:

Read the full article on Seeking Alpha

For further details see: