Healthcare stocks have gotten swept up in the broader market carnage that started 2016, with the S&P healthcare sector down 5.6% through Friday against a 6% slide for the S&P 500.
Since 2000, healthcare has topped the S&P’s performance in seven of the past 10 Januarys, including the past three. The Nasdaq Biotechnology index has been even stronger, besting the S&P 500 in January in nine of the past 10 years, good for an average rise of 3.7% over that time against a 0.9 percent dip for stocks more broadly.
Investors will be listening for guidance on how healthcare companies are approaching regulatory and political risks facing much of the healthcare sector.
Pharmaceutical and biotech companies are likely to endure more criticism over pricing practices, especially as the 2016 presidential campaign heats up.
“As an industry, we are looking at a potentially very significant political disruption this year, and I think there’s a risk factor that has to be compensated for,” says Brad McMillan, chief investment officer at Commonwealth Financial Network in Waltham, Mass. “It wouldn’t be an area I would overweight.”
The outlook for the Affordable Care Act, President Barack Obama’s healthcare program known as Obamacare, will also be in focus after some hospital chains posted weak third-quarter results that suggested diminishing benefits from the program, and top insurer UnitedHealth Group said in November it might drop out of the individual insurance exchanges created under the ACA.
“Getting a sense of what their outlook is for Q1 is going to be important,” says Bihag Patel, senior research analyst at Nuveen Asset Management in Minneapolis.
