The Health Care Select Sector SPDR (NYSEArca: XLV) is down 2.6% year-to-date, positioning the largest healthcare exchange traded fund for its first annual decline since 2008. Some market observers believe 2017 will bring better things for the S&P 500’s third-largest sector weight.
XLV and rival healthcare ETFs struggled this year in large part due to election year rhetoric aimed at high pharmaceuticals prices. In August, Democratic presidential nominee, Hillary Clinton, put the spotlight on Mylan (NasdaqGS: MYL) EpiPen prices, triggering a selloff in biotech exchange traded funds and reminding investors of political risks in an election season. Her comments were particularly painful for ETFs such as the iShares Nasdaq Biotechnology ETF (NasdaqGM: IBB) and the SPDR S&P Biotech ETF (NYSEArca: XBI).
But with 2016 presidential election in investors’ rear view mirrors, the healthcare sector offers rebound potential in 2017.
“Within health care, it remains to be seen whether the Republican Party’s call for a repeal of the Affordable Care Act will gain traction, which may reduce public access to health care services and, in turn, have potentially negative implications for some health care providers and medical device manufacturers. On the other hand, many drug companies have been under pressure in recent months due to market concerns that a Clinton administration would enact legislation to rationalize drug pricing, which would negatively affect pharmaceutical and biotechnology companies,” according to Franklin Templeton research posted by ETF Daily News.