Johnson & Johnson, UnitedHealth Give Healthcare ETFs a Much Needed Bolster Shot | ETF Trends

Healthcare stocks and sector-related exchange traded funds found support from a strong start to the earnings season after UnitedHealth Group (NYSE: UNH) and Johnson & Johnson (NYSE: JNJ) provided a much needed boost to a lagging market segment.

On Tuesday, the Health Care Select Sector SPDR ETF (NYSEArca: XLV) rose 1.8%, iShares U.S. Pharmaceuticals ETF (NYSEArca: IHE) gained 1.9% and iShares U.S. Healthcare Providers ETF (NYSEArca: IHF) increased 1.9%.

The healthcare sector rallied after UnitedHealth and Johnson & Johnson revealed better-than-expected quarterly results and raised their forecasts, the Wall Street Journal reports.

UNH shares were up 8.1% and JNJ was 1.6% higher. UNH makes up 23.% of IHE’s underlying portfolio and 10.3% of XLV while JNJ accounts for 22.4% of IHF and 6.2% of XLV.

Healthcare stocks have been among the worst performing areas in the S&P 500 this year, gaining just 5.4% compared to the 19% rise for the benchmark index. The sector has been vulnerable to political risks as politicians have called for controlling the expensive drug prices and Democratic presidential candidate Bernie Sanders pushing for a Medicare for All plan.

Daniel Clifton and Courtney Rosenberger at Strategas Securities argued that the underperformance of health-insurance stocks reflects the probability of a Democratic nomination that would push through negative policy changes for the healthcare industry. Even former Vice President Joe Biden, a moderate, has shown support for expanding on the Affordable Care Act with a public health-insurance option, such as Medicare, which would compete with private insurers.

“The equity market does not see Biden as a real threat to private insurance, the way you would Bernie Sanders or Elizabeth Warren,” Clifton told the WSJ.

“Statements that health care will be socialized, Medicare for All, combined with pressure from the Republicans on pharmaceutical cost controls and so forth” are adding pressure, Sam Stovall, CFRA’s chief investment strategist, told the WSJ.

For more information on the healthcare segment, visit our healthcare category.