Thursday's stock market sell-off and rising concerns about global growth have rattled some investors, but the health care sector may offer an attractive hiding place, according to Wall Street pros. The pullback came as Wall Street strategists have grown increasingly tepid about the near-term direction of the market, which has reeled off a string of record highs in recent weeks but is facing uncertainty about the Federal Reserve and variants of Covid-19. "[Thursday's decline] is highlighting this push and pull between investors with different time horizons. In the near term, it's hard to argue that any of the news on the delta variant gets any better," said Jeffrey Kleintop, chief global investment strategist at Charles Schwab. Amid that uncertainty, there appears to be a growing appetite for more defensive plays. Bank of America said in a note on Thursday that fund flows from private clients have shown build-ups in defensive positions over the past four weeks, with utilities being the most popular. That environment could be good news for investors in health care, a traditionally defensive sector that some Wall Street pros have turned bullish on in recent weeks. Health care enters a growth phase Because the companies were hit so hard during the pandemic, which forced hospitals across the country to suspend many non-Covid procedures and care, health care is in a sweet spot as a defensive play with strong year-over-year growth, said Alicia Levine, head of equities at BNY Mellon Wealth Management. "They terribly underperformed very early cycle, as one would expect, and of course the actual facts on the ground that people stopped going to the doctor and stopped doing unnecessary procedures during the pandemic, all of that will come back," Levine said. "So in a sense, health care is in a growth phase now and also the sector will do well in this kind of mid-cycle phase." The spread of the delta variant of Covid-19 is a growing concern for the broader market, but Kleintop said that health stocks should be able to better withstand another wave of Covid in the U.S. as the medical system should be able to operate more normally than last year. "The idea that hospitals would be overwhelmed seems like a low probability, given the effectiveness of the vaccine, particularly with regard to severe cases, and the fact that hospitals are better prepared for this," Kleintop said. Attractive prices The health care sector is currently trading near record highs, but the stocks have mostly trailed the broader market this year. The S & P 500 has gained 16% year to date, while the Health Care Select Sector SPDR Fund has climbed about 13%. That underperformance, combined with a weak year for the sector in 2020, means that health care stocks are attracting the attention of some value investors. Eli Salzmann, manager of the highly rated Neuberger Berman Large Cap Value Fund, said he has added pharmaceutical positions in recent months. Johnson & Johnson and Pfizer are top-10 holdings for the fund. "If you look at some of the larger pharmaceutical companies, they certainly are inexpensive and they are certainly within the value spectrum," Salzmann said. Meanwhile, BTIG's Julian Emanuel included several health care stocks in his top picks for the second half of 2021. The strategist said in a note this week that he is bullish on medical device stocks Boston Scientific and Thermo Fisher . -CNBC's Michael Bloom contributed to this report.
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Thursday's stock market sell-off and rising concerns about global growth have rattled some investors, but the health care sector may offer an attractive hiding place, according to Wall Street pros.