Strategic trade
Trade view / 08 February 2018 at 10:00 GMT

MM Strategic Book: US healthcare outperforms financials — #SaxoStrats

Global Macro Strategist / Saxo Bank Group - Singapore Hub
Price target: 0.7480
Market price: 0.673742

US financial shares have vastly underperformed their healthcare cousins in this current cycle since the 2008 financial crisis. But momentum is now shifting given the repricing of inflation and interest rate expectations. Furthermore, there's the potential for a public and political backlash against a US healthcare sector that has been fleecing consumers for decades. See Peter Garnry's recent works on this –he was ahead of the curve with this from 2016.  

Jan 2018 Watch US healthcare on Amazon/Berkshire/JPMorgan deal — #SaxoStrats

Nov 2016 US Election: Is the health care system unsustainable? — #SaxoStrats

I would also expect the Amazon–Berkshire–JPM partnership to become a theme over the next few years, as large corporate look for better solutions for their employees. US healthcare is going to be a huge political theme in the US midterm elections in November.  

At the same time – even though we've been talking about this on Macro Monday for well over a year – it seems clearer and clearer that the Fed is going to have to step up its rate hikes and the market is finally starting to come around to our thesis, that the inflation risk in the US is massively to the upside. 

Also worth noting is something that I find downright fascinating: at the Fed there is not one prediction that sees CPI being higher than 2.1% or 2.3% in 2019.

See this recent interesting piece from Bloomberg citing legendary trader Paul Tudor Jones. 

Inflation Is About to Appear ‘With a Vengeance,’ Paul Tudor Jones Says

IYF US financials ETF
 Source: Bloomberg

IYH US healthcare ETF
 Source: Bloomberg

Management and risk description

Risking 150 bps

Timing could be a risk here, given that we have already see quite a move in healthcare being washed out over the last two weeks (on a combination of Trump's State of the Union speech and the Amazon partnership). 


Entry: Entry ratio level of 0.673742 

Long IYF from 119.34 (US financials ETF)
Short IYH from 177.13 (US healthcare ETF)

Stop: Stop 0.61

Target: Targeting 0.7480 & 0.88

Time horizon: 3–18 months.

Worth noting there is a similar theme of short US healthcare ETFs vs. long global healthcare ETFs – you still have that massive outperformance from the US side, that should now potentially start to mean revert. 

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
A compiled overview of Trade Views provided on is found here


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail