Healthcare (XLV) vs S&P 500
XLV (Health Care Select Sector SPDR) is down approximately 7% year-to-date in 2026 while SPY is up roughly 5%, a 12-percentage-point gap that has broken healthcare's historical defensive reputation. Eli Lilly carries a 14-15% XLV weight on the strength of GLP-1 franchise economics, but UnitedHealth, Merck, and Pfizer have collectively dragged the index lower on Medicare Advantage margin compression, IRA drug-price-negotiation phase-in for 2026 selected drugs, and post-COVID vaccine revenue normalization.
Also known as: Healthcare (XLV) (ETF_XLV, healthcare) · S&P 500 ETF (SPY) (ETF_SPY, S&P 500, SPX, SP500)
Why This Comparison Matters
XLV (Health Care Select Sector SPDR) is down approximately 7% year-to-date in 2026 while SPY is up roughly 5%, a 12-percentage-point gap that has broken healthcare's historical defensive reputation. Eli Lilly carries a 14-15% XLV weight on the strength of GLP-1 franchise economics, but UnitedHealth, Merck, and Pfizer have collectively dragged the index lower on Medicare Advantage margin compression, IRA drug-price-negotiation phase-in for 2026 selected drugs, and post-COVID vaccine revenue normalization. The pair captures whether healthcare is functioning as a recession hedge (the historical role) or as a regulated-price-pressure sector (the post-IRA reality). The April 2026 configuration says the latter is dominant.
What XLV holds and how SPY differs in composition
XLV is the Health Care Select Sector SPDR Fund, tracking the S&P 500 health-care industry sub-set. As of April 2026 the top weights are Eli Lilly at roughly 14.3%, UnitedHealth Group near 7%, Johnson & Johnson around 6.5%, Merck near 5%, AbbVie around 5%, with the top ten holdings representing approximately 53% of fund assets. The expense ratio is 0.09%. The fund holds 60 stocks total. SPY tracks the cap-weighted S&P 500 with health care representing approximately 10.4% of the index in April 2026, down from 13.5% in 2022.
The sectoral mix inside XLV has shifted meaningfully. Pharma has fallen from approximately 50% of the fund in 2018 to roughly 38% in April 2026 as Eli Lilly's GLP-1 franchise scaled and as legacy pharma multiples compressed under Inflation Reduction Act drug-price-negotiation overhang. Managed care has fallen from approximately 17% to 14% on UnitedHealth's 2024-2025 deratings tied to Medicare Advantage utilization spikes. Medical devices and biotech together hold roughly 32%.
The 2026 underperformance: what is driving the negative-7% gap
Three concurrent drivers explain the 12-percentage-point year-to-date 2026 underperformance versus SPY. First, IRA Maximum Fair Price negotiations for the first ten Part D drugs took effect January 1, 2026, with selected drugs from Bristol Myers Squibb (Eliquis), Merck (Januvia), Johnson & Johnson (Xarelto, Stelara), AbbVie (Imbruvica), and Novo Nordisk (Fiasp/NovoLog) seeing price reductions of 38-79% from their 2023 list prices per CMS. The aggregate revenue impact across XLV components is roughly $5-7 billion in 2026, modest in absolute terms but concentrated in high-margin franchises.
Second, UnitedHealth has declined approximately 18% year-to-date on continued Medicare Advantage utilization concerns and the lingering reputational impact from the December 2024 Brian Thompson assassination and subsequent Optum cyberattack disclosures. UnitedHealth's 7% XLV weight means the single-name drag is roughly 1.3 percentage points. Third, vaccine revenue at Pfizer and Moderna has continued to normalize from COVID-era highs, with Pfizer's COVID franchise revenue down 38% year-on-year in Q1 2026.
GLP-1 franchise economics and the Eli Lilly anchor
Eli Lilly's tirzepatide franchise (Mounjaro for diabetes, Zepbound for weight management) generated approximately $24 billion in 2025 and is on track for $34-38 billion in 2026 per consensus. Novo Nordisk's semaglutide franchise (Ozempic, Wegovy) generated approximately $42 billion in 2025. The two firms together represent the dominant GLP-1 supply, although Novo Nordisk is not in XLV (Danish-listed, foreign-issuer rule).
Conditional Forward Response (Tail Events)
How S&P 500 ETF (SPY) has historically behaved in the 5 sessions following a top-decile or bottom-decile daily move in Healthcare (XLV). Computed from 1,285 aligned daily observations ending .
Following these triggers, S&P 500 ETF (SPY) rises 0.00% on average over the next 5 sessions, versus an unconditional baseline of +0.22%. 128 qualifying events; S&P 500 ETF (SPY) closed positive in 57% of them.
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Frequently Asked Questions
Why is XLV down 7% in 2026 while SPY is up 5%?+
Three concurrent drivers. First, IRA Maximum Fair Price negotiations took effect January 1, 2026, with the first ten Part D drugs seeing price cuts of 38-79% from 2023 list prices, hitting Bristol Myers, Merck, J&J, AbbVie, and others for an aggregate $5-7 billion revenue impact. Second, UnitedHealth has declined approximately 18% year-to-date on Medicare Advantage utilization concerns; its 7% XLV weight contributed roughly 1.3 percentage points of drag. Third, COVID vaccine revenue continued to normalize at Pfizer and Moderna with Pfizer down 38% year-on-year in Q1 2026.
What are XLV's top holdings in April 2026?+
Eli Lilly at roughly 14.3% (the largest weight), UnitedHealth Group near 7%, Johnson & Johnson around 6.5%, Merck near 5%, AbbVie around 5%. The top ten holdings represent approximately 53% of fund assets. XLV holds 60 stocks total. The expense ratio is 0.09%. Pharma represents approximately 38% of the fund, managed care 14%, medical devices and biotech together approximately 32%.
Has XLV stopped working as a defensive sector?+
Largely yes in the current regime. The 2008 GFC saw XLV fall 30% versus SPY 56% (26-percentage-point cushion). The 2020 COVID crash saw XLV fall 25% versus SPY 34%. The 2022 hiking cycle saw XLV fall 14% versus SPY 25%. But 2023 saw XLV gain 0.3% versus SPY 24%, and year-to-date 2026 XLV trails SPY by 12 percentage points. Three structural forces have inverted the relationship: IRA drug-price negotiation, Medicare Advantage margin compression, and AI-capex-driven SPY mega-cap concentration. Healthcare has shifted from defensive sector to regulated-price-pressure sector.
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