The iShares Nasdaq Biotechnology ETF (NasdaqGM: IBB), the largest biotech ETF by assets, is up 7% this month, but some of the post-election ebullience afforded struggling biotechnology stocks and exchange traded funds is waning.
However, market observers are growing more bullish on the sector as a Republican-led Congress and administration could enact reforms to free cash held overseas for tax reason by large U.S. pharmaceutical companies, which could pave the way for increased acquisitions in the sector.
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.
The healthcare sector is rallying due in large part to Republican Donald Trump’s win in this month’s election and while Trump dispensed his own harsh rhetoric against high pharmaceuticals prices, he was usually seen as the preferred candidate for healthcare and biotech stocks and ETFs. Markets clearly are reflecting as much.
Still, some technical analysts see biotech as still in fragile technical position.
“What IBB does at falling resistance line could influence the broad markets going forward. Even if you do not own Biotech, don’t overlook how important its price message could be and its potential impact on the broad markets,” according to Investing.com.
The impact of a Trump presidency on healthcare stocks remains to be seen. Candidate Trump rebuked Obamacare and if successful in that effort, there would likely be some effect on diversified healthcare ETFs due to their exposure to health insurance providers. However, Trump is seen as more friendly toward industry consolidation, which could be a boon for biotechnology, a group with a deep history of acquisition activity.
For more information on the biotech sector, visit our biotechnology category.
iShares Nasdaq Biotechnology ETF