Diversified healthcare exchange traded funds, including the Vanguard Health Care ETF (NYSEArca: VHT) and the Health Care Select Sector SPDR (NYSEArca: XLV), have struggled mightily this year. With Election Day just a few days away, those struggles are intensifying.
For example, XLV is down 7.3% over the past week bringing its year-to-date decline to 6.4%. Making matters worse for the healthcare sector, the second-largest sector weight in the S&P 500, is that previous areas of strength, such as medical devices makers, are faltering as well.
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The technical prognosis is not encouraging for ETFs such as XLV.
Drug and biotech stocks led the decline while medical device and equipment makers seemed to be more resilient. However, as the presidential election nears, this last holdout has started to succumb to the bears. I’ll leave it to political pundits to debate whether this is an indication on how the election is tipping,” reports Michael Kahn for Barron’s.
Until recently, one of the areas strength in the otherwise downtrodden sector had been medical devices stocks and ETFs such as the iShares U.S. Medical Devices ETF (NYSEArca: IHI), the largest dedicated medical devices exchange traded fund.
[related_stories]After hitting a record high in October, IHI has succumbed to profit taking and is scuffling along side diversified healthcare ETFs such as XLV and VHT.
Industry observers argue that medical technology companies can tap into increased healthcare spending among emerging economies while the U.S. market has matured and could experience slower growth. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020.
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“The medical equipment group seems to be rolling over to the downside one stock at a time and that is not a good place for investors to look for bargains. Healthcare in general is in trouble and that is one more argument to hold more cash than normal in this tumultuous election season,” according to Barron’s.
For more information on the biotech sector, visit our biotechnology category.
Health Care Select Sector SPDR
