Just went things were starting to look up for the iShares Nasdaq Biotechnology ETF (NasdaqGM: IBB), SPDR S&P Biotech ETF (NYSEArca: XBI) and other biotechnology exchange traded funds, signs point to investors remaining pensive about these ETFs.
Healthcare stocks and ETFs rallied immediately following Republican Donald Trump’s surprising November victory. 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.
While Trump was seen as the preferred candidate for the healthcare sector, the newly inaugurated president has not been shy about unleashing rhetoric aimed at high pharmaceuticals prices. Additionally, some industry observers believe healthcare stocks could face more politically-induced headwinds as the Republican-controlled Congress looks to unwind the Affordable Care Act, also known as Obamacare.
Last week, investors pulled money from biotechnology ETFs, marking the second consecutive week of departures from the group.
“We note the breadth ratio – a measure comparing the number of funds with inflows to those with outflows – decreased from 0.36 last week to 0.34 this week. Over the past eight weeks, this ratio has averaged ~0.38. We note that, historically, the breadth ratio rarely dips below 0.3, and when it does it has been associated with trough Nasdaq Biotechnology Index (NBI) levels,” according to a Raymond James note posted by Teresa Rivas of Barron’s.