THIS WEEK’S BREAKDOWN

UnitedHealth Just Got Cut in Half

You might think, “I don’t own UNH, so this doesn’t affect me.”

But when the most dominant healthcare company in the U.S. loses over $300 billion in value in six months, it doesn’t just impact shareholders—it exposes weak points in the broader market.

This isn’t just a bad earnings quarter or a company-specific scandal. It’s a reflection of bigger themes that affect every investor today: fragility in megacaps, passive investing risks, inflation-driven cost overruns, regulatory heat, and the importance of adaptability in your portfolio.

Here’s what happened, why it matters beyond UnitedHealth, and what smart investors can do to stay ahead.

When Megacaps Fall, Indexes Follow

UnitedHealth wasn't just any stock. It was:

• The largest healthcare company in the U.S.

• A dominant piece of both the Dow and the S&P 500 healthcare sector

• Worth $625 per share and $575B in market cap just six months ago

Now it’s trading near $311—cut in half—and responsible for 88% of the Dow’s decline since November 2024.

Key takeaway:

• Even if you don’t own the stock, chances are your passive ETFs (like SPY, VOO, or XLV) were hit

• Passive investing isn’t immune to stock-specific risk if those stocks dominate the index

Diversification by name count doesn’t mean diversification by exposure.

Strategy Spotlight: Dynamic Sector Rotation

Markets aren’t just volatile right now—they’re uneven. Some sectors are breaking down while others are quietly building strength.

The Dynamic Ratio Allocator leans into that imbalance.

This strategy analyzes price relationships between assets like KO and PEP and uses statistical signals and moving averages to dynamically rebalance between:

• Core exposure: SPY and TQQQ (broad market and leveraged tech)

• Defensive plays: PEP and KO (consumer staples)

When the market shows strength, the strategy leans into growth (TQQQ). When volatility hits, it shifts into defense. Over time, that balance has delivered strong performance while staying nimble and risk-aware.

Systemic Fragility Is the New Market Normal

UNH’s collapse was triggered by a perfect storm:

• A record-setting cyberattack in early 2024 froze provider payments and affected 190 million patients

• Public backlash and congressional scrutiny followed

• A tragic and shocking CEO assassination happened mid-investor day

• DOJ launched a criminal investigation into its Medicare Advantage practices

• Major leadership turnover and a credibility crisis ensued

This was the kind of black swan scenario no spreadsheet can model—but one we need to start expecting more of.

• Markets today are more sensitive to systemic shocks—cybersecurity, regulatory, social, and leadership-related

• These events don't just affect individual stocks—they ripple across sectors and indexes

Medicare Advantage Isn't the Sure Bet It Was Supposed to Be

UNH has the largest share (29%) of the Medicare Advantage market. For years, this was seen as a growth goldmine. But with high enrollment came higher-than-expected costs.

• UNH mispriced the cost of care for this population two years in a row

• The result: declining margins, missed earnings, and investor selloffs

• Other insurers were better diversified or more conservative in their pricing assumptions

Key takeaway:

• Even dominant market share doesn’t protect you from model risk

• Aging demographics drive demand, but also strain profitability

Healthcare investing isn’t as bulletproof as it was made out to be.

Confidence Is Currency, and It's Running Low

In just six months, UNH lost two CEOs—one to a tragic act of violence, another to internal fatigue and pressure. Former CEO Stephen Hemsley is now back as a temporary stabilizer.

But to the market, this signals:

• Weak succession planning

• Lack of organizational control

• Declining investor trust in leadership

Key takeaway:

• In uncertain macro environments, clear leadership matters more than ever

• Lack of confidence drives down multiples—fast

The Macro Message: Passive Investing Alone Is No Longer Enough

UNH’s downfall is part of a broader pattern. In 2024–2025, we’ve seen:

• Major sector rotations driven by interest rates, inflation, and geopolitical risk

• Increasing dependence on fewer large-cap names to hold up the indexes

• A sharp rise in event-driven volatility, from cyberattacks to regulatory action

In this environment, static portfolios are at risk. What’s needed is adaptability—strategies that move with the market, not against it.