Healthcare Election

Vinay Thapar and Edward Bryan at AllianceBernstein address the stereotype that healthcare stocks are risky during election years. Obviously healthcare is a major area of public policy, and politics has the potential to greatly influence healthcare systems and operations. But empirically speaking, has election-year politics demonstrated a significant influence on healthcare stock returns? Thapar and Bryan argue that the answer is no:

Thapar and Bryan comment that the healthcare industry is insulated to a degree from regulatory concerns. Aging populations provide a structural tailwind for healthcare services, which already comprises 10% of global GDP. Some firms use business models that are partially shielded from US regulatory and reimbursement regimens; other firms, such as those in diagnostic services and artificial intelligence, operate in areas that could improve cost and efficiency of healthcare systems, and as such would be unlikely political targets. For 2024, divided US government control between Democrats and Republicans has yielded a government that struggles mightily to even pass a budget, so it’s hard to envision Congress passing any major legislation this year.

The authors also observe that the Inflation Reduction Act of 2022, which included measures to cap insulin prices and allow Medicare to negotiate prices on some drugs, hasn’t curtailed pharmaceutical research and development spending:

Politics is a factor affecting healthcare firms, but does not appear to be the factor. While the presidential election season will create a lot of noise and hot air, it’s unlikely to have a systemic effect on healthcare stocks. People can have strong political opinions, but caution should be exercised when mixing politics with investing.

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This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument or investment strategy. This material has been prepared for informational purposes only, and is not intended to be or interpreted as a recommendation. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice.