The market landscape has shifted unanimously to a more risk-off environment in FY22. Indeed, the macro-thematic now includes inflation, central bank tightening and prospects of a recession.
The distribution of possible outcomes for the global economy is even wider. Alas, managers running client money reckon it's time to add resiliency into portfolios for H1 FY23.
One way to diversify within singular asset classes like the equities, such as in the S&P/ASX 200 Index (ASX: XJO), is to concentrate on various sectors that are sensitive or not to the business cycle.
'Defensives' as they are known, often provide a layer of resiliency and downside protection in choppy markets, especially on a forward looking basis.
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ASX 200 Healthcare shares to dominate
The healthcare sector will retain its position on the mantlepiece as the top performing sector in FY23, according to Tribeca Investment Partners portfolio manger Jun Bei Liu.
Liu said this posture stems from 3 factors, "stabilising interest rate expectation, the opportunity for outsized near term growth and its structural growth prospects," according to Livewire.
COVID-19 was also a major anomaly for the defensive sector, causing a huge backlog and pent-up demand.
"Many healthcare companies will see a significant return to growth from the next half," Liu added.
"[B]ut it could take as long as 18 months to two years to clear the enormous backlog that has been built up over the past two years."
Moreover, with the prospect of economic downturn threatening consumer spending and aggregate demand, healthcare companies are largely agnostic to these challenges.
In fact, healthcare is considered a defensive sector that is largely insensitive to the business cycle.
It therefore comes as little surprise to see Liu advocate for the sector in the forward looking regime.
The sector has already caught a bid in FY23, with the S&P/ASX 200 Health Care Index (ASX: XHJ) climbing nearly 6% higher over the past month. This contrasts with the benchmark S&P/ASX 200 Index (ASX: XJO)'s return of 2.6%.
It has now clawed back losses incurred this year to date, as seen below.
