With 2020 election season in the rearview mirror, it could be a great time to revisit health and pharmaceutical ETFs, including the VanEck Vectors Pharmaceutical ETF (NASDAQ: PPH).

PPH tracks the MVIS US Listed Pharmaceutical 25 Index. That index “is intended to track the overall performance of companies involved in pharmaceuticals, including pharmaceutical research and development as well production, marketing and sales of pharmaceuticals,” according to VanEck.

Recently, PPH is trending higher, buoyed by a round of encouraging news on the coronavirus vaccine front, a fight several of the fund’s components are involved in.

“Hopes of a return to normality are increasing after a year of pandemic-induced tumult. News that COVID-19 vaccines developed by Pfizer and BioNTech, and Moderna were more than 90% effective in clinical trials lifted global stock markets, with health care stocks outpacing the gains in the U.S., Asia and Europe over the week,” according to VanEck Research. “The level of efficacy was much higher than the 70% that many had hoped for, raising expectations that vaccinations could help boost the sluggish global economy, and provide a way out of the pandemic.”

The PPH ETF: Beyond the Vaccine

Positive vaccine developments are clearly of benefit to PPH and rival ETFs, but the goods news is that the VanEck fund will retain its utility even after the virus is defeated.

“The possibility of a divided U.S. Congress may further propel the pharmaceutical sector, benefiting pharmaceutical ETFs. Although both Democrats and Republicans are supportive of drug pricing and reimbursement reform, the prospects of big changes to government health plans are lower if there is a policy gridlock,” according to VanEck.

Healthcare spending made up 18% of U.S. GDP, and it is rising. Looking ahead, by 2020, it is projected that global healthcare spending could shoot up to $8.7 trillion as the industry faces increased challenges from an aging population, rising costs, a shortage of skilled workers, legacy I.T. systems, invasive procedures, and medical errors.

PPH has other tailwinds, including attractive valuations, growth outlets, and the aging U.S. population.

PPH YTD Performance

“Meanwhile, third-quarter results from the pharmaceutical sector has been upbeat so far, with almost 90% of the companies reporting better-than-expected revenues and earnings. Analysts expect the momentum to continue, with industry estimates from Factset projecting earnings growth over the next couple of years,” notes VanEck. “A growing, ageing and richer global population will further boost demand for improved biotechnology and healthcare. Technological advancements such as the increased use of artificial intelligence and online doctors, and evolving care models may also ensure a long tailwind for the sector.”

For more on innovative portfolio ideas, visit our Nasdaq Portfolio Solutions Channel.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.