For 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.
“Some of the momentum behind IHI’s rise is politically driven. When the Affordable Care Act (ACA), also known as Obamacare, was enacted several years ago, it contained a tax targeting medical device makers, including some of the companies residing in IHI. Although IHI soared along with the broader healthcare sector during the Obama Administration, data suggests the medical device tax was punitive to the industry’s workers,” reports Investopedia.
That tax is currently under a two-year suspension, but there is plenty of speculation that with the Republicans controlling the White House and both houses of Congress, the medical device tax will be repealed for good. The tax has cost the industry nearly 30,000 jobs over the past several years.
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.