The healthcare sector is facing a rough economic picture and headwinds that could adversely impact the exchange traded funds that track it.
Key provisions have not yet been put into place, therefore, S&P Capital IQ Investment is giving the sector a marketweight rating.
“The pharmaceuticals sub-industry, which represents the largest weighting in the S&P Healthcare Sector at 50.5%, is faced with numerous challenges, in our view, most notable, the patent cliff that started in late 2011 and continues through 2014; additional taxes and fees along with higher required pricing discounts associated with healthcare reform, which began in 2011; and current and potentially additional austerity measures in Europe, which accounts for 25% of U.S. pharmaceutical sales,” Jeffrey Loo, CFA, of S&P Capital IQ Equity Research wrote in a recent report.
The Supreme Court is still ruling the constitutionality of the individual mandate component of healthcare reform law, a key piece of the legislation. A decision will be made in late June or early July, reports Loo. [Defensive ETFs for a Market Pullback]