Trump’s Election Victory Sends Stock Market Soaring, But Healthcare Stock Suffers

TL/DR –

The US healthcare sector lost nearly 10% since September due to heightened uncertainty about policies that could affect healthcare companies under President-elect Donald Trump, according to Morningstar. This comes as the Morningstar US Healthcare Index lost 3.4% since November 5, with the majority of the declines occurring between November 8 and 19. However, the sector is trading at a discount of 6.6% overall, with Karen Andersen, Morningstar’s director of healthcare equity research, stating: “The uncertainty around the next four years under the Trump administration has created some buying opportunities.”

Trump’s Victory Sends Stock Market Up but Healthcare Stocks Struggle

Following Donald Trump’s presidential election win, the stock market experienced a boost but healthcare stocks didn’t experience the same success. The Morningstar US Healthcare Index fell by 3.4% since Nov. 5, with significant losses from AbbVie and Eli Lilly. However, medical device manufacturers and insurers managed to avoid the downward trend.

Why have Healthcare Stocks Seen Losses?

Healthcare stocks have been falling since August end. Analysts suggest that uncertainties around policies affecting healthcare companies under the new administration are leading to these losses. On the bright side, the selloff means many healthcare stocks are now undervalued.

Impacting Factors on Healthcare Stocks

Karen Andersen, Morningstar’s director of healthcare equity research, notes rising unpredictability in government leadership of healthcare. This is making investors apprehensive. The appointment of Robert F. Kennedy Jr. to head the Department of Health and Human Services has also added to the ambiguity. Kennedy’s opposition to vaccines and skepticism about obesity drugs could make it tough for companies to get new vaccine approvals and impact trust in vaccines.

Healthcare Stocks: Winners and Losers

AbbVie and Lilly were the biggest drags on the US Healthcare Index post the election. On the other hand, pharmaceutical wholesaler McKesson and UnitedHealth Group gained post-election. Analysts predict insurers could benefit from the incoming administration. Medical device manufacturers like Intuitive Surgical, Boston Scientific, and Stryker have also seen more than 4% returns post-election.

Opportunity in Undervalued Stocks

The healthcare sector is trading at an overall discount of 6.6% according to Morningstar’s fair value estimates. This presents opportunities for investors, given that the overall US market is trading at about a 5% premium. Morningstar analysts cover 109 healthcare stocks, of which 15 carry a 5-star rating, meaning they’re trading at large discounts. The remaining 45 stocks carry 4-star ratings, indicating they are undervalued.

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