Health Care Sector Looking Unhealthy on Reform Concerns
The health care sector has been rather disastrous this week so far. Tuesday saw slightly worse than a -2% drop in the Health Care Select Sector SPDR ETF, XLV. Then, the ETF extended those losses by nearly -3% on Wednesday. Year to date (as of the market close on Wednesday, 4/17/2019), XLV is slightly negative. This makes it the worst performing major sector of 2019. Concerns over potential upcoming health care reforms are a large part of what’s been pressuring the sector of late.
U.S. Health Care Reform Concerns Pressure Sector
With U.S. elections coming up in 2020, Trump-challengers have been jockeying into position. Among those challengers are some candidates, most notably Bernie Sanders, who are proposing large-scale health care reforms. This promises to be among the most fiercely-debated topics ahead of what will certainly be a hotly-contested race.
This week, Sanders touted a ‘Medicare-for-All’ government-run health care system that appears to be gaining both political and popular support. This and similar proposals are giving rise to serious concerns over the potential future impact on health insurers and the health care industry as a whole.
Health Care Stocks Feeling the Heat
Though the 2020 U.S. presidential elections may seem like they’re a while away (and anything can happen), major investors are notoriously forward-looking. Any potential threat on the horizon that could significantly impact an entire sector is certainly a concern worth heeding.
That said, this week’s plunge in the health care sector may well have been overdone in the near-term. But if similar calls for health care reform continue to build momentum, XLV is likely to drift back down to its late-December trough, and potentially lower.
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Senior Market Analyst at The Technicals
A veteran global macro trader/analyst, Bart focuses on major market moves in currencies, commodities, fixed income, and global equity indexes. Bart stresses inter-market correlations and dynamics while keeping a close eye on risk. He has published countless market analysis pieces and has been a guest expert for a variety of major financial media. Contact Bart