Bellevue AI Health

US economic growth continued to stabilize in November and the Federal Reserve lowered its overnight lending rate for the second consecutive meeting, a move that had been widely anticipated. The somewhat surprising election of Donald Trump as the 47th president of the United States and the Republican sweep of the Senate and the House of Representatives were the headlines that moved markets the most in November.

The outcome of the US elections led global stocks sharply higher. Major large-cap indices such as the MSCI World (+4.6%) and the S&P 500 (+5.9%) closed well in the green. Tech stocks (NASDAQ 100 +5.3%) and small caps (Russell 2000 +11.0%) also showed strong gains. The broader healthcare segment’s performance (-0.9%) was much weaker in comparison. News that Trump had picked vaccine skeptic Robert F. Kennedy Jr. as the next US health secretary had an unjustifiably negative impact on biotech and pharmaceutical stocks. The Bellevue AI Health Fund (-1.1%) closed lower as well, and more or less in line with its benchmark.

In view of Trump’s pick for the head of the US’s biggest health agency, the fund’s exposure to BioPharma stocks (53.3% weighting at the end of month) was the primary factor for the fund's weak showing with a negative impact of 2.7% and 0.3%, respectively, on absolute and relative performance. Recursion Pharmaceuticals (+11.9%), Gilead (+4.2%) and Incyte (+0.6%) had a positive impact, while Amgen (-10.9%), AbbVie (-10.3%) and Eli Lilly (-4.0%) weighed on performance. Recursion, a company specializing in AI-driven drug discovery, beat investor sales expectations thanks to a payment from collaboration partner Roche. Gilead exceeded investor sales expectations thanks to HIV drug sales and raised its full-year forecast for 2024. Amgen did not quite meet high investor expectations regarding Phase II data on the efficacy of its obesity drug MariTide, which has a longer dosing interval, but management expressed confidence in the product candidate and is already planning the third phase of this clinical study.

Medtech stocks (28.0%) contributed 0.7% and 0.2% to the fund’s absolute and relative performance. Innovative large-cap medical technology companies with outstanding management teams such as Stryker (+10.1%), Boston Scientific (+7.9%), Intuitive Surgical (+7.6%) and Abbott (+4.8%) made positive contributions to performance. Trump’s nomination of Robert F. Kennedy Jr. as the next US health secretary reinforced medtech’s reputation as a safe haven. In addition, medtech companies are profiting from the sustained sharp upturn in surgical procedure volumes.

Healthcare services (12.9%) contributed a positive 0.8% to absolute performance and a negative 0.2% to relative performance. While McKesson (+25.6%) and UnitedHealth (+8.1%) made positive absolute contributions, HCA Healthcare (-8.8%) was a performance detractor. McKesson reported interim results that beat low investor expectations and the company raised its earnings guidance for the full year. Trump had voiced support for Medicare Advantage during his first term, which led to the markup in UnitedHealth shares, but he is not expected to maintain federal subsidies for hospitals, which is why HCA Healthcare shares retreated.

The technology segment (5.3%), which includes tech companies from both the healthcare and information technology industries, contributed 0.3% to absolute and 0.2% to relative performance for the month. Oracle (+10.1%), Veeva Systems (+9.1%) and Waystar (+8.2%) made positive contributions to absolute and relative performance, while Qualcomm (-2.6%) was a performance detractor.

All performance data in USD / B shares.

The rapid development of generative artificial intelligence (GenAI) is ushering in an unprecedented technology-driven transformation that ranks right next to other key milestones such as the Internet, cloud computing and the smartphone. GenAI is creating tremendous opportunities for businesses and investors, especially in the health sector. According to a number of studies, the health sector will be one of the industries that will benefit the most from the deployment of GenAI. This forecast is mainly based on the considerable potential for efficiency gains in healthcare systems, on the large, readily available amounts of data in healthcare systems, and on the considerable financial resources available for healthcare needs.

Already today medications are being developed more quickly and with better rates of success, for example, new diagnostic and treatment methods are producing better clinical outcomes, and GenAI is helping medical professionals make better and more informed decisions. We focus on healthcare companies that have made GenAI a core element of their business strategy and that are investing substantial resources in this technology to gain a lasting competitive advantage and achieve superior value growth. The technology risk here is more calculable than in other industries because healthcare is such a heavily regulated industry.