By Philip van Doorn, MarketWatch
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People — and investors — can become very emotional as a presidential election heats up, and this time around, feelings are obviously running high.
According to the polls, President Trump is likely to be shown the door and Joe Biden will have his party control both houses of Congress. Does this excite you? Does it fill you with dismay? Maybe the best thing for you to do as an investor is put your emotions aside and think rationally about which companies are likely to benefit from a Democratic sweep.
Ed Clissold, chief U.S. strategist at Ned Davis Research, a company that provides research to institutional investors, believes the managed health-care industry is ripe for strong performance in the event of a “clean sweep” by the Democrats.
He said the health-care sector tends to come under pressure heading into an election because “both parties, but especially the Democrats, have talked about more regulation.” But in an interview, he went on to say that following an election, health care tends to outperform the broad market “because the regulation isn’t as bad as expected.”
Clissold believes “Medicare for All,” supported by many Democratic presidential candidates during the primaries, “will never be the case.” And even if Biden saying is able to add a “public option” to the insurance exchanges that use managed-care companies under the Affordable Care Act, he would expect the new program “would still be run through the big managed-care companies, just like the Medicare Advantage programs.”
In other words, more revenue for the managed-care companies.
Managed care has outperformed under Trump
Here are two charts showing how the S&P 500 managed health-care industry group has performed against the entire S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.74% , with dividends reinvested.
First, total returns since Trump’s election on November 8, 2016:
FactSet
Here are total returns since Trump took office on Jan. 20 2017:
FactSet
Under Trump, with the Republicans controlling both houses of Congress for the first two years of his term, the S&P 500 managed-care industry group greatly outperformed the broad U.S. stock market.
Wall Street agrees
Clissold declined to name specific managed health-care companies for investment. However, there are only five industry players included in the S&P 500.
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