Heading toward election day, polling surveys and many market watchers anticipate Democrat Hillary Clinton to win the presidential race. However, Republican Donald Trump is quietly gaining backers, and investors may want to consider health care exchange traded funds in case of an upset.
The health care sector is the worst performing area of the S&P 500, with the S&P 500 Health Care Index down 8.4%, as traders sold off the area on political risk.
The health care sector, notably biotechnology and pharmaceutical stocks, has suffered from Clinton’s remarks on rising costs for specialized drugs. Many traders believe a Clinton administration would put biotech and pharma drug costs under the microscope when she takes office.
Consequently, a Trump upset could pave the way for a rebound after the political risk-induced selling this year.
“I’m taking a counter trade on health care,” Kevin O’Leary, O’Shares Investments chairman, said on CNBC.
[related_stories]O’Leary explained that in a recent visit to Philadelphia, a Democratic stronghold, many people he talked to were closet Trump supporters, which suggests that major election polls may not reflect how tight the presidential race really is.
“Maybe these polls aren’t right. Maybe we got it wrong. I don’t know. But I decided to put on a health care trade,” O’Leary told CNBC. “I’m going to go and venture into four areas that I think are going to spring back, just in case Trump wins.”
O’Leary pointed to four contrary health care-related ETFs trades that he thinks are good bets going into election day: The iShares U.S. Medical Devices ETF (NYSEArca: IHI), the largest dedicated medical devices ETF. The PowerShares Dynamic Pharmaceuticals Portfolio (NYSEArca: PJP), which targets pharma companies based on price momentum, earnings momentum, quality, management action, and value. The iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), which tracks the widely observed Nasdaq Biotechnology Index. Lastly, the VanEck Vectors Generic Drugs ETF (NasdaqGM: GNRX), the only generics-focused ETF.
If Trump wins, O’Leary believes these health care ETFs could pop overnight. Even if Clinton wins, the health care ETFs will remain a long-term trade, despite short-term volatility.
For more information on the health care sector, visit our health care category.