The iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), the largest biotech exchange traded fund by assets, lost nearly a quarter of its value in the first quarter. Some other biotech ETFs turned in worse performances and that has investors skittish about the near-term outlook for the once red-hot biotech space and its ETFs.
Multiple factors, including politics, have hampered IBB and its peers. Election year posturing over drug prices represents a significant headwind for the healthcare sector and that is something biotech ETFs like IBB have already proven vulnerable to. Just go back to September 2015 and refer to Hilary Clinton’s Twitter feed.
Investors who are closely watching the presidential race will want to keep an eye on Clinton in the coming months. If Clinton makes her way to the Oval Office and implements more regulation on pharmaceutical drug pricing, biotech companies may underperform the broader market.
But with controversy high, investors may be have the opportunity to enter an ETF like IBB at far more favorable pricing than was available a year ago.
“Mr. Market is helping here to possibly right the ship. It is necessary to stress possibly, at this point. We haven’t seen the recovery in biotechs like we have in the larger indices. This one is truly turning a cargo ship or a freight train,” according to TheStreet.com. “The good news is we’ve seen a halt in the declines and now have what I view as a tradable pattern. The wedge pattern here aligns resistance with the 50-day simple moving average (SMA). The middle of the wedge aligns with the 10-day SMA, so there are two very clear levels to watch and they are not far apart.”[related_stories]
IBB finished the first quarter 19% below its 200-day moving average but only slightly below its 50-day line. The ETF has not resided above its 200-day line since late in the third quarter of 2015.
Weighing on the health care industry, election year uncertainty has hit the sector, reports Tom DiChristopher for CNBC.
Both Democratic presidential front runner Hillary Clinton and GOP hopeful Donald Trump support the right for the government to negotiate Medicare drug costs. Additionally, Clinton has previously stated she would tackle “price gouging” from drugmakers if she is elected. [Clinton Delivers Poison Pill To Biotech ETFs]
Smead Capital Management CEO Bill Smead told CNBC, though, argues that investors are missing a buying opportunity in the health care sector as the area lags behind the broader equities market.
iShares Nasdaq Biotechnology ETF
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.