March 2022 / VIDEO
Inflation, Innovation, and Our Outlook for Health Care Stocks
Our longer-term outlook for the health care sector is positive, but we expect markets to remain volatile in the near term.
Key Insights
- Our longer-term outlook for the health care sector remains positive, but we expect equity markets to remain volatile in the near term.
- Aging populations, increasing demand for clinical procedures, and advancements in research tools and increasing investment capital are driving innovation.
- Higher inflation could pressure margins, while higher interest rates could dampen merger and acquisition activity, leading to periods of short-term weakness in certain areas of health care.
Transcript
Our longer-term outlook for the health care sector remains positive.
However, we expect equity markets to remain volatile in the near term.
Aging populations, increasing demand for clinical procedures, and accelerating innovation are leading to the development of game-changing therapies and medical devices.
Advancements in research tools, increasing investment capital, and a maturing contract research and development field are also helping drive drug innovation.
The U.S. Food and Drug Administration’s Center for Drug Evaluation and Research granted 50 new drug approvals in 2021.
Innovative emerging modalities such as gene and cell therapies, precision tissue delivery, and targeted protein degradation have shown great promise.
We expect innovation in the sector to continue at a rapid pace.
But we also recognize the uncertainty investors face regarding the ongoing health crisis and potential new variants.
Higher inflation could pressure margins.
Higher interest rates would raise the cost of capital and potentially dampen merger and acquisition activity.
This could lead to periods of short-term weakness in certain areas of health care.
We are focused on finding the best innovations in medicine and health care services that improve patient outcomes, access, and/or affordability.
We believe we are in the midst of a golden age for health care.
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March 2022 / EMERGING MARKETS EQUITY
Ziad Bakri is the portfolio manager for the Health Sciences Equity Strategy in the U.S. Equity Division. He is chairman of the Investment Advisory Committee of the Health Sciences Fund. Ziad also is a vice president and an Investment Advisory Committee member of the US Large-Cap Core Growth Equity, US Large-Cap Equity Income, US Global Growth Equity, US Small-Cap Growth Equity, and All-Cap Opportunities Equity Strategies. Ziad is a vice president of the T. Rowe Price Tax-Efficient Funds, Inc., and T. Rowe Price International Funds, Inc. He is a vice president of T. Rowe Price Group, Inc.