Schroders stated that concentration in global equity markets is extremely high, with investors shifting capital in recent years into popular sectors such as AI and defense industries. The five largest US tech giants now account for nearly 20% of the MSCI All Country World Index, leading to crowded positioning in the tech sector, while the healthcare sector has underperformed in recent years and is currently trading at a substantial valuation discount.

The firm expects population aging to provide strong structural support for the healthcare sector, creating an attractive entry opportunity for investors. It believes that as regulatory headwinds gradually fade and underlying earnings momentum re-emerges, healthcare stocks will transform from overlooked market laggards into one of the asset classes with the best risk-reward profiles in global equities.

Total M&A transactions in the pharmaceutical and biotechnology sectors have reached approximately USD100 billion so far this year, while biotechnology financing in 2Q26 surged 86% YoY. Schroders noted that major pharmaceutical companies are facing significant patent expiry risks, with revenue exposure from patent cliffs over the next eight years estimated at around USD400 billion. The firm expects drugmakers to actively pursue acquisitions or licensing of strong late-stage development projects.