Health Care Sector Looking Unhealthy on Reform Concerns

Chart of Health Care Select Sector SPDR Fund (XLV)
Chart of Health Care Select Sector SPDR Fund (XLV) – Source: TheTechnicals.com and TradingView

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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Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose stock may be mentioned.

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