Market Overview

It Could Be A While Before This ETF Really Bounces Back

It Could Be A While Before This ETF Really Bounces Back

Plenty of health care exchange traded funds can be dubbed disappointing this year. The iShares U.S. Healthcare Providers ETF (NYSE: IHF) is one fund that belongs in that group.

What Happened

While IHF's year-to-date gain of 5.88% is tepid at best, the fund's lethargy is not its fault. Rather, investors in IHF and the stocks held by the ETF are finding themselves at the wrong place at the wrong time. The time is a presidential election cycle that kicked into high gear early in 2019, featuring momentum for "Medicare for All."

Regardless of one's feelings about Medicare for All and the candidates endorsing that idea, markets are saying it's not a good idea.

IHF confirms as much as does UnitedHealth's (NYSE: UNH) status as one of the worst-performing members of the Dow Jones Industrial Average this year. That stock accounts for almost 22% of IHF's weight.

Why It's Important

IHF has rallied nicely off its May lows, but until the field of contenders for the 2020 presidential election is pared further and/or it becomes clear those candidates will not push for Medicare for All, investors may need some convincing before embracing IHF.

“Despite leading Democratic candidate Joe Biden leaning toward more moderate approaches, heated debate exchanges pushed presidential hopefuls Kamala Harris and Elizabeth Warren higher on investors’ radars,” according to Bloomberg. “Both support versions of a national health-insurance program.”

Some analysts that follow stocks such as UNH and other IHF components have noted that if Biden falls behind in the polls to a rival that favors Medicare for All, healthcare providers stocks are likely to suffers as a result.

What's Next

Note that IHF traded higher through most of July as second-quarter earnings from its components streamed in, but the fund tumbled late last month. Sure, some of that could be attributable to the flareup of trade hostilities with China, but none of IHF's holdings have anything resembling notable China exposure.

Rather, the fund's recent dip could be pinned on the second round of Democratic debates, underscoring the point that, for investors, politics and IHF typically don't mix.

“Debates are scheduled to go on until late December, after which voters will start casting their votes during the first primaries and caucuses in February,” reports Bloomberg.

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