Beset by political problems for much of this year, the iShares U.S. Healthcare Providers ETF (NYSEArca: IHF) was a laggard ETF in a sector full disappointments. But things change in financial markets and often do so rapidly and that has been a boon for IHF.
Over the past month, IHF is higher by more than 11%, boosting its year-to-date gain to 15.53%. Sure, that lags the S&P 500, but considering from where the fund was coming from earlier this year, it’s recent run is impressive. Importantly, IHF’s good times appear poised to continue into year-end.
“Shares of major health-insurance firms were rising Monday morning as political developments over the weekend seemed to lessen the chances of Medicare for All being implemented in the near term,” reports Josh Nathan-Kazis for Barron’s.
IHF has been dogged this year by speculation that Medicare For All could become a reality if Democrats win the White House in 2020. Many of the most visible Democratic contenders for that party’s 2020 presidential nomination are embracing Medicare For All.
IHF is a traditional index fund that targets U.S. equities in the healthcare providers sector. Specifically, the ETF provides exposure to U.S. companies from health insurance, diagnostics, and specialized treatment.
“Medicare for All, the health plan championed by Democratic presidential hopefuls Elizabeth Warren and Bernie Sanders, would effectively eliminate the managed-care industry,” according to Barron’s. “Fears of the plan have weighed on the sector this year, and Warren’s elaboration of the details of her plan in early November failed to shake the stocks.”
Previously, investors embraced healthcare stocks for the sector’s growth and defensive characteristics, providing investors with yields and valuations that are less stretched than other yield-producing stocks like utilities. However, the managed care group is betraying that defensive reputation as investors sell IHF components amid intensifying political conjecture and concerns that hospital costs are rising, a scenario that also pressures managed care firms.
“On Friday, Warren released new details on her Medicare for All plan, in which she said she likely wouldn’t seek to pass legislation instituting full Medicare for All until her third year in office,” reports Barron’s.
Even with that news, IHF is up 3.35% over the past week.
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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.