New York, NY – Healthcare exchange-traded funds (ETFs) are experiencing a slowdown as the second quarter begins, causing concern among strategists as the prospect of a Biden-Trump election rematch looms. The pause in momentum for healthcare ETFs comes after a strong first quarter rally, prompting analysts to assess the sector’s outlook amidst the upcoming political landscape.
Despite a robust beginning to the year for some pharmaceutical companies, U.S. healthcare stocks are struggling to maintain their upward trajectory in the second quarter. The Health Care Select Sector SPDR ETF XLV, which includes companies like Eli Lilly & Co. and Pfizer Inc., has seen a 3.9% decline, marking one of its worst weekly performances since 2022. The healthcare sector overall has been the weakest performer among the S&P 500 segments, down nearly 4% compared to the index’s 2% decrease.
The recent announcement by the Centers for Medicare and Medicaid Services regarding payment rates for Medicare Advantage plans has led to a drop in healthcare stocks, particularly affecting companies like UnitedHealth, Humana Inc., and CVS Health Corp. The market’s disappointment with the government’s decision has contributed to the downward trend in the healthcare sector this week.
Historically, healthcare stocks have underperformed in presidential election years due to political uncertainty and policy changes. However, with the upcoming Biden-Trump election rematch, strategists believe that the lack of discussion around major healthcare policy changes could result in less volatility for healthcare stocks this year.
Despite the challenges, some analysts see value in healthcare stocks, noting that the sector is still undervalued compared to the broader equity market. The market may not fully appreciate the innovation happening in areas such as pharmaceuticals, medical devices, and diagnostics, presenting potential opportunities for investors looking for long-term growth prospects.
Looking ahead, as the healthcare sector navigates through the uncertainties of the political landscape and market conditions, investors are advised to stay informed and monitor developments closely for potential opportunities. The healthcare industry’s resilience and ability to adapt to changing environments will be key factors in determining its performance in the coming months.