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Sen. Bernie Sanders has the best shot in the Democratic primary field at winning the Iowa caucuses this evening, according to pollsters. Sanders is a bit of a boogeyman for health-care investors, given his commitment to a health-insurance scheme that would effectively kill much of the managed-care industry, and his victories have a tendency to rock health-care stocks.
So should investors brace for a fall tonight if Sanders wins Iowa?
Probably not, wrote Jefferies health-care trading-desk analyst Jared Holz in a note released Sunday evening.
“Based on all of the rhetoric headed into Iowa, we believe the Street is pretty well conditioned for a Sanders victory,” Holz wrote. “Assuming Sanders takes Iowa, which most statistics point to, we believe Healthcare can hold in OK provided the gap between him and Biden is relatively small.”
A victory by former vice president Joe Biden in the Iowa caucus, on the other hand, might boost health-care stocks. “A Biden win this week in Iowa we believe would spur a materially higher move in the [health-care sector,] particularly in the
Healthcare Services
space,” Holz wrote.
Health care stocks have been trailing the market so far in 2020, dragged down by the insurance companies. The
S&P 500
is up 0.2% since Dec. 31, while the
S&P 500 Health Care
sector is down 2.9%. The
S&P 500 Managed Health Care
subsector, which consists of the major health insurance firms, is down 7.6%, while the
S&P 500 Pharmaceuticals
index has fallen 1%.
It’s not at all clear that the weakness stems from worry over Sanders’s surge. Disappointing earnings have hurt some insurers, particularly
Anthem
(ticker: ANTM). And growing anxiety over the Wuhan coronavirus is also likely having an impact.
In a note on Monday, Mizuho analyst Ann Hynes wrote that she expected Biden to eventually win the Democratic nomination, but said that wouldn’t be certain for months. In the meantime, she wrote that she expected swings in health-care services stocks.
“We expect continued near-term volatility and would be buyers on weakness of stocks most impacted,” she wrote, highlighting
HCA Healthcare
(HCA) and
Humana
(HUM) as her top picks.
The S&P 500 Health Care sector was up 0.8% as the market opened Monday, amid a marketwide rebound after a steep decline on Friday.
Write to Josh Nathan-Kazis at [email protected]