Pfizer at a two year high, health stocks become a refuge

The short version

• Pfizer and Solventum were among the seven companies in the S&P 500 with a new 52 week high on 1 September.
• Pfizer reached 29.09 dollars, a level last seen in October 2024.
• Cyclical consumer is the weakest of the eleven sectors with minus 2.3 percent, while eight sectors are up.

Two yearly highs against the market trend

While travel and consumer stocks were marking new yearly lows in early September, health went the other way. Pfizer and Solventum were among the seven companies in the S&P 500 with a new 52 week high on 1 September. Pfizer reached 29.09 dollars, a level last seen in October 2024.

The reason lies less in individual medicines than in the character of the industry.

The shift is visible across the whole year

This shift can be read clearly across the current year. Cyclical consumer is the weakest of the eleven sectors with minus 2.3 percent, while eight sectors are up.

A single trading day therefore shows in miniature what the year shows on a large scale. The stocks whose demand can be postponed are under pressure. The stocks whose demand remains are in demand.

Low valuations and patent protection

A second point comes on top that is often overlooked with pharmaceutical stocks. After years of weak price performance, valuations in the industry are comparatively low measured against profits.

That explains why a return into defensive names lands here in particular. Anyone stepping out of cyclical industries meets shares in health that are not expensive measured against profits.

Health and energy on the same day

The simultaneity stands out. Health stocks and energy stocks marked yearly highs on the same day, although the two industries have little in common. They are linked by one thing, namely that their demand does not hang on consumer mood.

So 1 September stands for a pattern and not for two separate reports. On one side seven yearly highs from industries that are independent of consumer mood. On the other side travel and consumer stocks at new yearly lows.

Assessment

A price at the level of October 2024 is not a triumph but a return. That puts the report in perspective.

I find what the move says about the market as a whole more interesting. When investors go into health and energy at the same time and out of travel and consumer, that is not a bet on an industry but a statement about the expected economy.

Such shifts usually last longer than individual price moves, because they rest on expectations and not on news.

Frequently asked questions

What does defensive mean for a share

Defensive means that the demand of the business model barely depends on the economy. People take their medicines even when they are saving. Industries such as travel, vehicle building or luxury goods count as cyclical, where customers can postpone their spending. In uncertain phases capital regularly moves from cyclical to defensive.

What is a patent cliff

That is what specialists call the moment when a patent expires. After that copies are allowed onto the market and the price of the original collapses. That is why a pharmaceutical group is measured not by its current profits alone but by what is coming through in development.

Why did health and energy stocks rise on the same day

Because both industries share the same feature, although they otherwise have little in common. Their demand does not hang on consumer mood. On 1 September seven companies in the S&P 500 marked a new 52 week high, while travel and consumer stocks reached new yearly lows.

This analysis is for information only and is not investment advice.