Health care stocks have rallied sharply since March market lows. The relative and absolute outperformance versus the S&P 500 has reached indiscriminately across the sector, pushing shares higher in biotech, medical technology, services and pharmaceuticals. Through the three months ending in May, the XLV has rallied 9.9% while the S&P 500 was up a mere 0.6%.

The question now is how sustainable is the rally given its sudden onset and the growing list of deteriorating macro factors.

Health care has led the way for gains in the S&P 500 before. The unfortunate fact is that past rallies in Healthcare have not been good omens of things to come. The last three acceleration and peaks in health care relative performance have not ended well:

But this time may be different. Granted, the last four years have been extreme in terms of the scope and scale of the headwinds facing the broader economy, and management teams across every health care sector have faced these economic challenges to varying degrees since 2008. An exact repeat of the crisis that enveloped the globe is unlikely.

Personal consumption decelerated rapidly late in 2008 and marked a low in early 2009, taking medical spending down with it. It looked then like consumer was more likely to make a return trip to his local shopping mall than the doctor’s office.

Defensiveness is in the eye of the beholder. While the Great Recession had its own unique timeline that began with Bear Stearns and subprime lending problems, there are other new crises vying for the global economy’s attention. The current group of stories include the end of QE2, a double dip in housing, a slowing global economy, decelerating job growth, a Greek Sovereign Bond Restructuring, state budget cuts, and the developing debt ceiling debate here in the U.S. The last two center on the long-term spending on Medicare and Medicaid, which accounts for over half of all health spending in the U.S.

Assuming that any one of those new threats has a chance of derailing the rally, will investors be safe hiding out in health care stocks? Conditions are already deteriorating for the sector, and with the broader market rally closer to an end than a beginning, health care is no longer a safe haven.

Unemployment. Employers are still the primary purchaser of private health insurance policies on behalf of their employees. Without improving weekly unemployment claims, the unemployed will find access to the health care system elusive.

Job growth is not adding to the ranks of the insured and those with jobs with employer-based insurance are facing higher co-pays, deductibles, and co-insurance. An additional consumption headwind is coming from commodity prices, and real wages are beginning to decline in the face of food and gasoline prices. There is less to spend on the visit to the physicians office. The slowdown in medical spending appears to be already taking hold.

Consumer spending. Ultimately, if investors are looking to health care stocks to protect their portfolios in the coming months they should consider the following chart carefully. The chart below tells two stories. The first is that into the deceleration and decline in consumer spending in 2008-2009, healthcare spending slowed as well. The second is that as consumer spending rebounded from the 2009 lows, medical spending not only did not rebound but actually decelerated further. Now, as economic data begins to weaken again, the health care-consumer spending relationship is tightening again.

COBRA subsidy. We calculated the incremental spending from the COBRA subsidy that was offered early on in the crisis. The contribution to growth based on our estimates, is that the tailwind in early 2010 added an incremental 5% to total medical spending. The end of the COBRA subsidy may also be playing a part in decelerating medical spending.

Increased expectations. Estimates have moved higher as company results have surpassed quarterly expectations. Further improvement from here into slowing job and real wage growth should be increasingly difficult to come by.