Stocks rallied Wednesday, a day after one of the most contentious midterm elections in U.S. history. In Tuesday’s midterm elections, Democrats emerged with control of the House while Republicans maintained control of the Senate.
Among the winning exchange traded funds Wednesday were biotechnology funds, including the SPDR S&P Biotech ETF (NYSEArca: XBI), which takes an equal-weight approach to the biotech space. XBI was up nearly 2% in midday trading, indicating it could be bucking an ominous trend set the last times Democrats gained control of the House.
“The SPDR S&P Biotech ETF (XBI) fared the worst after the Democrats took control of the House 12 years ago,” according to Schaeffer’s Investment Research. “The fund was roughly flat the week and month after the election, but eventually slumped to a 9.6% loss through the end of that year. As it stands now, XBI recently broke below support at its year-to-date breakeven level just below $85, and now appears to be fighting resistance at this price point.”
Other Biotechnology ETF Ideas
Biotechnology stocks and exchange traded funds participated in the October broader market swoon, punishing funds such as the Direxion Daily S&P Biotech Bull Shares (NYSEArca: LABU) in the process.
LABU, which takes the 3x or 300% daily performance of the S&P Biotechnology Select Industry Index, is attempting to reverse its October slide this month and is off to a good start this month.
Related: Leveraged Healthcare ETF Gains On Midterm Election Results
Immediately following the 2006 midterm elections, when the Democrats last gained control of the House, three of the five worst-performing non-leveraged ETFs were healthcare funds, including XBI.
XBI is up more than 6% over the past week, perhaps indicating that this year, biotech investors were comfortable with the Democrats seizing control of the House.
LABU’s bearish counterpart is the Direxion Daily S&P Biotech Bear 3X Shares (NYSEArca: LABD). That ETF tries to deliver triple the daily inverse returns of the S&P Biotechnology Select Industry Index. That index is an equal-weight benchmark, meaning it leans toward mid- and small-cap biotech names.
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