Healthcare Investors May Be Pricing In A Clinton Victory

The healthcare sector, as measured by the Health Care Select Sector SPDR (NYSE:XLV), hasn't been terrible this year. XLV, the largest healthcare exchange traded fund by assets, is up 3.9 percent year-to-date. However, that's a middling performance among the sector SPDR ETFs and a far cry from some of the annual gains investors have recently been accustomed to with XLV.

As has been duly noted throughout the course of this presidential election, rhetoric from both parties concerning high pharmaceuticals prices has been a drag on the healthcare sector, biotechnology stocks in particular.

XLV allocates nearly 21 percent of its weight to biotechnology stocks, making it difficult for the ETF to outperform rivals tracking other sectors when biotech stocks lag. So concerned are investors about this year's anti-biotech political posturing that they have yanked $1.22 billion from XLV.

However, there are signs that healthcare investors are starting to come grips with the fact Democratic nominee Hillary Clinton could very well be the next president. For example, XLV is higher by 7.5 percent over the past 90 days. The SPDR S&P Biotechnology ETF (NYSE:XBI), which is off 11.1 percent year-to-date, is up 19.2 percent over the past three months.

The market widely expects a Clinton presidency to be negative for drug and biotech companies. Clinton has vowed to crack down on price gouging by drug companies, and she has floated the idea of capping prescription drug costs. This could cause the drug and biotech sector to come under pressure, a reality the industry faced in September of 2015 when Clinton tweeted about price gouging and biotech stocks promptly fell more than 4%, said State Street in a recent note.

Interestingly, XBI, the third-largest U.S. biotech ETF, has added $323 million in new assets this year with about $107 million of that arriving into the fund just since the start of the current quarter.

Healthcare services providers and hospital operates, which can be accessed via an ETF such as the SPDR S&P Health Care Services ETF (NYSE:XHS), are among the healthcare names expected to thrive under another Clinton presidency.

On the other hand, a Clinton administration could be positive for insurers, hospitals and nursing homes. Her policies call for continuing to defend the Affordable Care Act (ACA), expanding Medicaid and increasing investment in public health, adds State Street.