Getting Defensive With Healthcare ETFs as Congress Moves to Replace Obamacare

Healthcare stocks and the corresponding exchange traded funds continue to spend time in the spotlight as the Republican-controlled Congress moves to replace the Affordable Care Act, also known as Obamacare. Even amid potential political controversy opportunity remains with the S&P 500’s third-largest sector allocation.

The iShares U.S. Healthcare ETF (NYSEArca: IYH) is up 11.1% year-to-date and could offer investors a defensive play with better appreciation potential and less interest rate risk than other defensive sectors.

The pharmaceutical and biotechnology sub-sectors may benefit under a Republican president and Congress as the industries are less at risk of price controls that Democrats vowed to impose. The iShares U.S. Pharmaceuticals ETF (NYSEArca: IHE) is up 6.7% year-to-date. IHE tracks the Dow Jones U.S. Select Pharmaceuticals Index and holds 40 stocks with a significant portion of ETF’s lineup devoted to blue-chip pharmaceuticals such as Pfizer (NYSE: PFE) and Merck (NYSE: MRK).

Healthcare stocks are also showing attractive valuations relative to other defensive sectors, which are richly valued.