With Election Day finally here, the biotechnology sector may be breathing a sigh of relief. iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), which tracks the Nasdaq Biotechnology Index, and rival biotechnology exchange traded funds have been plagued by rhetoric on high drug prices from both parties this year.
Investors who are closely watching the presidential race will want to keep an eye on Democratic nominee Hillary Clinton. If Clinton makes her way to the Oval Office and implements more regulation on pharmaceutical drug pricing, biotech companies may underperform the broader market.
SEE MORE: BBP – An Outperforming Biotechnology ETF
That has been the conventional wisdom for much of this year; that Clinton has been a drag on the broader healthcare sector and more specifically, biotechnology names. However, IBB and other biotech ETFs climbed Monday, indicating that investors could be reconciling the fact that Clinton is the likely winner today and that biotech stocks may be able to endure a Clinton presidency.
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.
“And this year is on pace to be the first year the health-care sector underperforms the S&P 500 after five years of outperformance, according to a note published Monday by S&P Global, although analyst Lindsey Bell cites this as a contrarian indicator for the sector, signaling a positive outlook,” reports CNBC.
[related_stories]Those who are wary of a potential biotech pullback can utilize a few inverse or bearish ETF options to hedge their positions if Clinton takes office.
For instance, the recently launched Direxion Daily S&P Biotech Bear Shares (NYSEArca: LABD) takes the -3x or -300% daily performance of the biotech sector, ProShares UltraPro Short NASDAQ Biotechnology (NasdaqGM: ZBIO) also tracks the -3x or -300% daily performance of the Nasdaq Biotechnology Index, ProShares Ultrashort Nasdaq Biotechnology (NasdaqGM: BIS) tracks the -2x or -200% daily performance of the biotech space and ProShares UltraShort Health Care (NYSEArca: RXD) follows the -2x or -200% daily performance of the broader healthcare sector.
SEE MORE: Clinton Delivers Poison Pill To Biotech ETFs
What biotech investors do not want to see is a Clinton victory coupled with the Democrats gaining control of the senate.
“Should Trump win on Tuesday, the biotech sector would rally, according to Larry McDonald, head of global macro strategy of ACG Analytics and editor of the Bear Traps Report investment newsletter. However, if Clinton were to win, and Democrats gain control of the Senate, “that’s a big problem for the IBB,” McDonald said in a CNBC interview.
For more information on the biotech sector, visit our biotechnology category.
iShares Nasdaq Biotechnology ETF
