When a new presidential administration is set to take office, there’s uncertainty as to whether specific sectors could be impacted. In the case of healthcare, that’s certainly the case, especially in biotech. But for vigilant bulls, it could be a potential buying opportunity.
The S&P 500 Health Care index is up around 4% YTD, which is far behind the broader index of over 27%. Part of the hesitance of hopping on board healthcare stocks could be how the new-look White House in 2025 will treat the sector.
“Analysts say heightened uncertainty about a range of policies that could affect healthcare companies under the new administration is driving the losses,” Morningstar noted. But the dip could also present an opportunity for investors. This could be beneficial to short-term and long-term investors alike.
“On the plus side, the selloff means many healthcare stocks are trading at prices our analysts peg as undervalued,” Morningstar added.
If upside is indeed ahead, traders may want to look at the Direxion Daily Healthcare Bull 3X ETF (CURE ). The fund seeks daily investment results equal to 300% of the daily performance of the Health Care Select Sector Index. The index includes domestic companies from the healthcare sector. These include pharmaceuticals, healthcare equipment and supplies, healthcare providers and services, biotechnology, life sciences tools and services, and more.
Of course, given the uncertainty heading into 2025, traders should proceed with caution. While healthcare is an industry that’s often mired in regulation, the opposite could happen in 2025, which could be a positive.
“Generally, government leadership in healthcare is looking increasingly unpredictable,” said Karen Andersen, Morningstar’s director of healthcare equity research. She also noted that under President-elect Donald Trump, there could be a push toward deregulation.
Bullish on Biotech?
A move toward less regulatory hurdles could benefit the biotech industry. It’s one where mergers and acquisitions could be made easier. That’s a common occurrence among biotech firms. A framework of less taxes could also benefit the biggest players in the industry. And that’s another potential positive.
Furthermore, with capital markets widely expecting the Federal Reserve to cut interest rates further, it could potentially fuel more IPO and M&AA activity due to reduced borrowing costs that can help fund deals.
This could give biotech bulls hope in the new year, which opens up a play for the Direxion Daily S&P Biotech Bull 3x Shares (LABU ). The fund seeks daily investment results equal to 300% of the daily performance of the S&P Biotechnology Select Industry Index.
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