Health care stocks could be the place to hide out for investors bracing for what many expect will be a volatile second half of the year. The industry is just starting to outperform, as traders rotate into a sector that is starting to look cheap after lagging this year. S & P 500 health care stocks are selling at 17 times forward earnings, far below their historical valuation. The entire S & P 500 sells for 23 times forward P/E. Exclude Eli Lilly , a high-flier thanks to its diabetes- and obesity treatments, and health care looks even more attractively valued. Lilly trades at 36 times forward earnings. “Healthcare looks very undervalued to us here, especially because healthcare is skewed to the upside, because [of] Eli Lilly,” said Dave Sekera, chief U.S. market strategist for Morningstar. “Eli Lilly is overvalued. We think the market is over extrapolating the amount of profitability and growth in the GLP-1 drugs, which Eli Lilly, of course, is, you know, the the poster child for today.” “If you were to take that out, the healthcare sector, as a sector, looks even more undervalued today,” Sekera said, presenting an opportunity for investors. .GSPHC YTD mountain S & P 500 health care sector, year to date On Tuesday, the Dow Jones Industrial Average , which contains health care giants UnitedHealth Group , Johnson & Johnson , Amgen and Merck rallied, while the S & P 500 and Nasdaq Composite, which are weighted toward tech stocks that led the recent advance, retreated. Health care’s relatively cheap valuations and above-average dividend yields give investors a “margin of safety” heading into the second half of the year, when the S & P 500 starts to look fairly valued at the same time as risks from tariffs and federal deficits continue, Sekera said. The strategist said he likes other beaten down parts of the market too, citing a preference for value stocks over growth issues and small caps over large caps. “Right now, I would actually prefer to see a greater margin of safety in the marketplace as a cushion for absorbing that amount of risk ,” Sekera said. “With the market being at fair value, I think positioning is ever more important than usual.”