For XLV and rival healthcare ETFs, the good news is that the U.S. economy moving into the late-cycle phase, overall growth may slow and signs of an economic slowdown could pop up. Consequently, investors may also turn to defensive sectors that are less economically sensitive, such as health care.
Among the most vulnerable to a shake up in the status quo, the hospital industry could be among the worst hit from the proposed changes, which could cause millions to lose health coverage. Looking at ETF options, the iShares U.S. Healthcare Providers ETF (NYSEArca: IHF) would be among the worst off in case of a sell off in the health industry.
“We believe the health care industry overall may benefit from myriad factors. An aging population globally and a swelling middle class in emerging markets could both drive increased consumption of routine health care services and demand for ever-more sophisticated treatments and cures. This demographic tailwind is fueling innovation in drug development and medical technology, and thus improving the prospects at select companies for robust sales and earnings,” according to the Franklin note seen on ETF Daily News.
For more information on the healthcare sector, visit our healthcare category.