Since 2019, the healthcare sector has been struggling and preparing for what may be a volatile and uncertain election year for stocks. But according to UBS, 2020 is shaping up to look a lot like 2009 for the sector, which could help reassure some investors.
Historically, “the market reaction has largely been to sell off much of the healthcare sector, lowering valuations until it clears up after the election,” UBS America health analyst Eric Potoker wrote in a note Tuesday. Tuesday.
Potoker argues that the “most relevant” comparison of how the healthcare sector is shaping up today is the 2008-9 election, when, in early 2009, President Obama “made healthcare reform a legislative priority and a dark cloud engulfed the sector. ” in areas that saw a Increased regulation “left health care markets intact,” while “overall demand for health care products and services increased” due to expanded health coverage.
However, that superior performance came to a halt before the 2016 election, when healthcare was back in the limelight. This time, as if it were “the right time,” health care valuations began to plummet last year, and the sector even recently traded below its 2009 low compared to the S&P 500, he notes.
But today, “we actually think 2021 will play out much the same as 2009 for the healthcare sector,” argues UBS’s Potoker.
The ‘barking worse than biting’ argument for a Biden presidency is one that applies to sectors other than healthcare. JPMorgan, for its part, has noted that the impact on corporations may not be that bad because President Biden is likely not to raise the corporate tax rate on “day one,” as he currently claims.
So which names are poised to benefit? In November of last year, Fortune highlighted several health stocks that may be more protected from electoral problems and have had a mixed but largely positive performance since then, such as Becton Dickinson (about 11% less than in November), Hologic (an increase of 23%). , Zoetis (up 32%), Merck (up 3.5%) and UnitedHealth Group (up 3.5%).
Taking 2009 as an example, Potoker says he remains “in the hope that the outcome of the elections will start the process of offsetting the political risk looming over the sector” and, with that clarity, “we believe investors will reward the sector”. Health. “For reliable growth with significantly higher valuations. Potoker adds:” In summary, we anticipate a period of strong performance for health stocks similar to the five-year period after ACA approval. “
