The Resilience of Healthcare Stocks in the 2024 US Election Year

#Investment Focus by KTAM #Take stock

Healthcare stocks in US election year

In the US election cycle Healthcare stocks often underperform. This is because investors often expect healthcare policy changes under a new presidential administration.

But if you go back and actually look at historical returns, the S&P 500® Healthcare Sector Index returned 8.9% year over year and the S&P 500® Index returned 10.6%, which is a long-term average Not much different (Source : Bloomberg Asset Management and Janus Henderson)

How will the 2024 US presidential election be different?

Both competing candidates have become president. It is a rare event in US election history. (The last case occurred more than 100 years ago, in 1912, when former President Teddy Roosevelt ran against his successor, William Howard Taft.)

As a result, investors are choosing to focus on candidates’ records on health care reform rather than campaign rhetoric.

Healthcare stocks have often underperformed in the past as investors await policy changes. Then it recovered when the policy was announced.

For example, prior to the passage of the Health Care Affordability Act (HAA) in 2010, uncertainty about their impact weighed heavily on healthcare stocks. But as the years progressed, investors began to realize that the ACA, which expanded health care coverage to millions of Americans, began to have a better effect on health care stocks.

The performance of healthcare stocks before/after the passage of the Act

For this election There has been no policy issue in the campaign on health care so far. President Joe Biden succeeded in passing inflation-busting legislation in 2022 that would allow the government to negotiate prices for certain drugs in Medicare (US health plans). for the elderly) and limit expenditure on over-the-counter medicines for the elderly. Starting from this year

Looking forward President Joe Biden has proposed expanding the law in order to increase the number of drugs that are eligible to be discussed and to raise the cap on spending on drugs. Former President Donald Trump, for his part, has once again criticized the ACA but has not offered any alternatives to legislation. He has also pushed for lower drug prices. and has issued regulations regarding price transparency for hospitals and health insurance companies.

An election year with no major health proposals.

So far, there have been no major policies in the campaign that indicate large-scale structural changes to the medical sector, such as during the 2020 campaign when candidates proposed Medicare for All, a single-payer health system, or in 2016, when Hillary Clinton, the Democratic candidate Proposes drug pricing And Trump proposes to repeal and replace the ACA (for the first time).

This year, there is no policy that will affect or attempt to make major changes. This means less uncertainty – and presumably less volatility – for healthcare stocks.

In late February the Department of Justice announced an antitrust investigation into UnitedHealth, a major insurance carrier, drug benefit management service, and physician network. (Under review) UnitedHealth’s acquisition of the physician group could have an unfair effect on competitors. and consumers?

Meanwhile, discussions regarding Medicare drug prices have been initiated by the pharmaceutical industry. Its legitimacy has been challenged. Currently, there are many legal cases in the process.

The bigger story – the global growth trend of an aging society.

Aging Demographics By 2050, one in six people worldwide will be 65 or older, an age group that typically spends three times as much on health care services as younger generations, and in the United States, more than 10,000 people turn 65 years old. every day

Healthcare stocks are trading at historically undervalued levels. After the disparity caused by COVID-19, this is an opportunity for healthcare stocks. That can help limit if there is an event that will have an overall negative impact on the investment. (including political impact)

and healthcare stocks Mergers and acquisitions are in the early stages, with more transactions taking place in 2023, including 22 deals worth more than $1 billion each. which is considered a new record

After the imbalance caused by COVID-19, there is finally innovation. Last year, the Food and Drug Administration approved 73 new drugs These drugs represent a new product cycle that could drive growth for 10 years or more in important diseases.

such as Alzheimer’s, immunology, cancer and diabetes, not to mention obesity – a new class of weight loss drugs called GLP-1s is becoming so popular that the therapy may generate sales of up to $100 billion over the next 10 years, we’ll see that true innovation is rewarded regardless of the political implications.

With trends in the pharmaceutical industry With so many new developments and product launches, it’s no wonder investors are ignoring the traditional results of this year’s US election year.

Summary that makes you think Healthcare stocks are making a comeback.

• Healthcare stocks in US election year It won’t be like many times in the past. Because the policies that will affect the change are still unclear.
• Investors are still ignoring and evaluating the price. Including giving less weight to investments in the healthcare sector than the market.
• The emerging aging society in the United States and developed countries Demand and purchasing power for treatment is important.
• Merger transactions of companies in this group still have opportunities and tend to increase continuously.

Column: Investment Focus by KTAM

Chatchaphon Siwalipha
Assistant Managing Director Product Strategy Department

Krung Thai Asset Management Co., Ltd.

#start #comeback #Healthcare #stocks #Thunhoon