Market Commentary

Déjà Vu All Over Again

By Rob Sigler, MBA

November 20, 2024

As Winston Churchill famously remarked, “those who do not study history are doomed to repeat it.”  The S&P 500 Health Care Sector ETF (XLV) has fallen roughly 10% in the past two months, punctuated by an accelerated drop post the President-Elect’s announcement that he intends to nominate Robert F. Kennedy Jr as Secretary of Health and Human Services.  Trump’s quote encouraging RFK Jr to “go wild” on healthcare has investors on edge that it could imperil fundamentals, unleash price controls, and restrict sales of vaccinations.  We remind investors that this pattern of selling off healthcare stocks in past election cycles is not new.  We saw this during the lead up to Bill Clinton’s presidency (Hillarycare), the election of Obama (Obamacare), and in both Trump terms (the first related to CMS being allowed to negotiate drug pricing for Medicare, and now the second with RFK Jr fears).  Our message to investors is that very little of consequence changes.  In the end, the catch-up trade is very powerful.  Don’t fall prey to this trap.

If historical context doesn’t put your mind at ease, we urge investors to ask themselves the following questions.  Do you really think that we will roll back over 120 years of historical usage of vaccinations?  These are the very scientific discoveries that allowed us to functionally eradicate smallpox, polio, tetanus, measles, mumps, and rubella.  Could we have tougher, longer trials, with larger control sizes?  Perhaps, but we aren’t going to radically alter the administration of vaccinations.  Second, do you truly believe that Donald Trump or the Republican party wants to cede dominance in leadership industries like pharmaceutical discovery, biotechnology, or medical technology to foreign entities?  Strangling these domestic companies with regulation, preventing them selling lifesaving medications, or restricting them from pursuing trials or discovery would absolutely cause that outcome.  The odds seem exceeding low to our team.  Finally, do we think that the Republican party will usher in price controls and extinguish the economic incentive for the industry to spend on research and development?  History tells us the opposite position has been a hallmark of the Party’s political stance for years.  Bottom line don’t let fear drive your investment function.  Common sense, and plenty of historical context, tells us the healthcare sector will be just fine.

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