NEW YORK: With another election year looming, investors in the healthcare sector are wary the coming months could reopen wounds suffered during the 2016 US presidential race. Healthcare becoming as a hot an issue in the 2018 midterm elections as it was two years earlier could threaten the sector. A big risk stems from voters giving majorities to Democrats in the US Senate and House of Representatives, in a rejection of President Donald Trump’s Republican party. Investors worry that shift would pressure the industry, including through a greater focus on prescription drug prices, even if Trump’s grip on the presidency tempers any regulatory changes. In 2016, similar scrutiny had plagued the healthcare sector, particularly pharmaceutical and biotechnology shares. “If we woke up tomorrow and it was a given fact (the Democrats) were going to take over the House and the Senate, healthcare would be one of the worst-performing sectors of the market,” said Walter Todd, chief investment officer at Greenwood Capital Associates in Greenwood, South Carolina. Momentum behind such a shift appears to be building after Democrat Doug Jones on Tuesday won a special Senate election in Alabama that will cut the Republicans’ Senate edge to 51 seats against 49 Democrat seats. Even so, healthcare shares would likely stand up better to election risk in 2018 than they did to the scrutiny of the sector in 2016. For one, the sector is cheaper relative to the broader market following 2016’s struggles. Investors also say it could benefit from a potential boost in merger activity if drugmakers and other multinational companies bring back cash held overseas under the tax overhaul bill moving through US Congress. The stocks also may be less vulnerable now to news about high drug prices and other healthcare developments, having already weathered those headlines in 2016, investors say. And some investors are also less concerned that healthcare will be a significant topic on the campaign trail this time around, given other issues that have come to the forefront since Trump’s election.
Published in Daily Times, December 17th 2017.