The pharmaceutical and biotechnology sub-sectors may benefit under a Republican president and Congress as the industries are less at risk of price controls that Democrats vowed to impose. However, investors must consider the potential risks to the sector associated with Republicans’ efforts to undo the Affordable Care Act (ACA), also known as Obamacare.
“Given XLV’s long-term trajectory, though, some of this recent put buying may be a result of those long healthcare guarding paper profits against any potential downside. Year-to-date, the fund has surged nearly 21% — guided higher by its 80-day moving average. Plus, XLV shares topped out at a record high of $83.41 on Sept. 13, and came within three pennies of matching this milestone earlier Tuesday,” according to Schaeffer’s.
XLV allocates about two-thirds of its combined weight to pharmaceuticals and biotechnology stocks. There are other catalysts to consider, including that the U.S. economy moving into the late-cycle phase, overall growth may slow and signs of an economic slowdown could pop up. Consequently, investors may also turn to defensive sectors that are less economically sensitive, such as health care
For more information on the healthcare sector, visit our healthcare category.