Healthcare stocks rise as election dust settles

Jan. 06, 2021 2:10 PM ETHealth Care Select Sector SPDR (XLV), IHI, IHF, IBB, SPY, HCA, CNC, A, MOHSPY, IBB, XLV, HCA, A, CNC, MOH, IHF, IHIBy: Dulan Lokuwithana, SA News Editor8 Comments
  • Healthcare stocks are soaring as clarity emerges over the outcome of the Georgia Senate runoff elections. Earlier in the day, Associated Press reported Democrat Raphael Warnock defeated Republican incumbent Sen. Kelly Loeffler tipping the scale towards Democrats to claim a narrow lead in the race to control the U.S. Senate.
  • Health Care Select Sect SPDR ETF (XLV +1.6%), iShares U.S. Medical Devices ETF (IHI +1.1%), iShares U.S. Healthcare Providers ETF (IHF +4.3%), and iShares Nasdaq Biotechnology ETF (IBB +1.9%) are all outperforming the S&P 500 Index (SPY +1.5%). Notable gainers include HCA Healthcare (HCA +5.4%), Centene Corporation (CNC +9.7%) and Agilent Technologies (A +3.5%).
  • On XLV, noting that the ETF fell behind ‘macro assets in 2020 as generalists fled the policy uncertainty, ’Goldman health-care strategist Asad Haider writes, “the sector typically outperforms as the broader policy agenda is clarified.”
  • A Senate led by Democrats will not “fundamentally change the health care outlook,” notes Height Capital Markets analyst, Hunter Hammond expecting incremental policy to be ‘very doable.’
  • In the health insurance sector, Centene and Molina Healthcare (MOH +9.1%) is likely to benefit the most, amid the legislative changes expected to “reduce marketplace premiums, increase subsidies, expand eligibility, and use carrot-and-stick methods to encourage Medicaid expansion.”
  • Meanwhile, JPMorgan’s Chris Schott predicts, “it will be difficult for the Democrats to enact significant U.S. Healthcare reform.”
  • Before the runoff, Bank of America turned bullish on healthcare facilities noting that the potential for ‘some good political news in 1H’ could lift the stocks until volumes return in 2H 2021.

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