As individuals have been sheltered-in-place over the past several months due to the ongoing coronavirus pandemic, they have been compelled or even obligated to postpone elective medical procedures so that priority can be placed on helping patients Covid-19. This could be setting up a unique opportunity in healthcare according to one financial expert.
The result of this postponement is that when elective procedures begin to ramp up once again, health care companies can likely continue to increase premiums, as well as drive a greater focus toward healthcare in general.
According to Todd Gordon, managing director of Ascent Wealth Partners, the Health Care Select Sector SPDR Fund (XLV) has, “actually done something on the monthly rotation looking back at the last six months that is noteworthy.”
The healthcare ETF has entered into the realm of two other leading sectors, communications, and technology, or the Technology Select Sector SPDR Fund (XLK) and the Communication Services Select Sector SPDR Fund (XLC), says Gordon. What this means is that healthcare may have transitioned from a defensive sector to a more offensive one, especially given that XLV continues to move higher on the backs of companies like United Healthcare.
“One name I mentioned that we do like is United Healthcare for fundamental reasons. From the technical point of view, you can see that the breakout that you may have identified on the XLV has occurred here, and you see that the series of highs right around the $300 to $305 mark have been exceeded,” said Gordon on CNBC. “We are now on breakout watch. We like the stock higher.”
Gordon believes the healthcare sector could strengthen based on an aging U.S. population and ongoing concerns over the coronavirus pandemic as the country moves deeper into the reopening process.
“Long-term we’re bullish on the sector as the demographics in the U.S. are aging and this will allow health insurers to demand higher premiums,” Gordon told CNBC on Thursday. “In light of everything that’s happened with Covid-19 almost pushing the economy into depression, there’s obviously going to be a greater focus on health care going forward.”
Gordon says the technical backdrop also could bolster the ETF, as XLV has seen a V-shaped recovery after the sell-off as it marks a trajectory toward highs.
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