January 23, 2022

Biden victory prospects weigh on US health sector

Joe Biden takes steps to widen Americans’ access to healthcare

Biden victory prospects weigh on US health sector

Biden victory prospects weigh on US health sector

Sector to undergo reform if Democratic candidate wins.

Investors are looking for lucrative deals in medical stocks, even though the prospect of winning The Democratic Party in next month’s election threatens more volatility for the healthcare sector, which is already trading at a historic discount to the broader market.

Former Vice President Victory Joe Biden over the current president Donald Trump November 3 and the potential rise to power of Democrats in the Senate could clear the way for prescription drug and health insurance price reform. These factors are commonly viewed as potentially negative consequences for companies. in this sector.

Some investors are betting that these prospects are already factored into the stock price of pharmaceutical companies, or that the impact may not be as dire as anticipated, while companies can benefit from their relatively stable profit prospects and their innovation in the field. medicine.

«For high quality companies trading at a reasonable price … there is a strong case for adding some share of the healthcare sector to their portfolios», – said James Ragan, Director of Research in Wealth Management at D.A. Davidson.

Biden’s improved electoral outlook has put pressure on health sector stocks for much of 2020, investors said: Health Sector S&The P 500 is up just 7% since the end of April, compared to a 17% rise in the overall S index&P 500.

The healthcare sector is currently trading at a 26% discount to S, according to Refinitiv Datastream&P 500 in relation to profit. Sector P / E ratio is well below S ratio&P 500 at 21.3, which rose last month to its highest value since 2000.

The gap between the P / E ratio in this sector and the S index&P last month was its highest in 25 years, although it has declined in recent weeks.

«As Biden started to perform better in the polls, we saw healthcare start to lag a bit as the rest of the market recovered.», – noted Ashtin Evans, Healthcare Analyst Edward Jones.

While Biden may rethink his approach to health insurance by proposing a government plan «public choice», he is also expected to seek to improve the Affordable Care Act – a health care law passed when he was vice president – under which companies are used to operating.

Any important drug pricing law may have to wait for the pandemic to subside as the government relies on the pharmaceutical industry to develop COVID-19 treatments and vaccines. Trump also pledged to cut drug prices.

«We think there remains a fairly high likelihood that the next Congress will introduce modest health policy changes that will clarify the long-term outlook for the sector and investors.», – wrote Eric Potoker, UBS Global Wealth Management analyst in a policy brief last month.

Ahead of the 2016 vote in which Trump confronted the former secretary of state Hillary Clinton, which opposed high prices for prescription drugs, the health sector fell 6.6% in October compared to a 1.9% fall in the overall S index&P 500

The sector has grown by 1.2% so far in October against the growth of the S index&P 500 by 1.7%. The promise of a financial stimulus package has raised groups such as financial and industrial enterprises, which tend to be more sensitive to the overall economic recovery..

Evans Sees Opportunity In Stocks Of Drugmaker Merck & Co and medical device manufacturer Medtronic Inc. Merck Shares Down 12% In 2020 And Medtronic Shares Down About 7%.

Melissa Chadwick-Dunn, portfolio manager of RS Investments, has long-term assets in areas such as diabetes and biotechnology, where she sees great potential for health breakthroughs and has the potential to grow portfolio share if a pullback occurs.

«The best antidote to all this uncertainty is a healthy dose of innovation.», – she said.