Trump Tries Recent Enthusiasm For Healthcare ETFs

Last year, the Health Care SPDR (ETF) XLV, the largest healthcare exchange traded fund by assets, declined for the first time since 2008. XLV's struggles and those of other major healthcare ETFs were largely attributed to election year rhetoric aimed at high pharmaceuticals prices.

Much of that rhetoric came courtesy of Democratic nominee Hillary Clinton. As was duly noted throughout the course of this presidential election, rhetoric from both parties concerning high pharmaceuticals prices has been a drag on the healthcare sector and for biotechnology stocks in particular.

However, President-elect Donald Trump isn't proving to be a friend of the healthcare sector, at least not yet.

'Getting Away With Murder'

On Wednesday, Trump sent the S&P 500's third-largest sector weight tumbling when he said pharmaceuticals companies are "getting away with murder" while promising to institute bidding procedures to potentially lower drug prices.

XLV sunk 1 percent following Trump's remarks, while the iShares Nasdaq Biotechnology Index (ETF) IBB, the largest biotechnology ETF, slid nearly 3 percent.

"Trading volume in the product has been lackluster recently, although we have seen some options interest involving the January 72 calls which are slightly out-of-the-money now with XLV’s recent run higher," said Street One Financial Vice President Paul Weisbruch in a recent note.

New Assets

Although both ETFs finished lower last year, IBB and XLV were on the receiving end of investors' assets. In 2016, IBB and XLV added over $1.8 billion in new assets combined. 

"IBB is up more than 16% from its early (pre-Presidential election) lows, but it is actually net down in the trailing one year period, so it may very well have additional room to the upside in the right business environment for the sector," adds Weisbruch. "In the trailing one year period, XLV has attracted net assets (>$860 million in) and IBB has packed in even more (>$1.4 billion in), so in spite of abnormal price volatility in the greater Healthcare segment for at least the past year, investment interest has not dampened."

XLV's top four holdings, a quartet representing almost 31 percent of the ETF's, are all members of the Dow Jones Industrial Average. Biotechnology is XLV's second-largest industry weight, behind pharmaceuticals, at 20.5 percent. Three of XLV's top 10 holdings are biotech stocks.

Trump has pledged to lower drug prices and on Wednesday bemoaned the fact that the U.S. government has no negotiating power despite being the largest pharmaceuticals buyer.