Market Overview

More Problems Emerge For This Health Care ETF

More Problems Emerge For This Health Care ETF

The iShares U.S. Healthcare Providers ETF (NYSE: IHF) has spent plenty of time in the spotlight this year and for all the wrong, though easy to explain reasons.

What Happened

Somehow, IHF is clinging to a modest year-to-date gain, but that 1.43% uptick is less than half the S&P 500 Health Care Index's 2019 showing and that's saying something because health care is the worst-performing sector in the S&P 500 this year.

As has been widely noted, IHF has hindered by speculation that the 2020 Democratic presidential nominee, whomever that will be, will push for "Medicare For All," a move that would decimate IHF member companies, including Dow component, UnitedHealth (NYSE: UNH).

Why It's Important

But there's more when it comes to obstacles facing IHF and those obstacles aren't related to the Medicare For All debate.

“A July hospital survey from JPMorgan last week has heightened concerns about insurers’ spending on patients’ medical claims in the third quarter. Anthem Inc., UnitedHealth Group Inc. and Centene Corp. were among the companies that flagged rising costs in the past quarter,” according to Bloomberg.

The market says those concerns are credible because IHF, an ETF that should be seen as defensive and one home to components with little to no export exposure, is trading lower than the S&P 500 this month. Said another way, the trade war with China should be sending investors to funds like IHF, but the ETF is betraying its defensive reputation.

Moreover, UnitedHealth, Anthem (NASDAQ: ANTM) and Centene (NYSE: CNC) combine for about 37% of IHF's weight, so if those stocks are falling in unison, IHF likely isn't moving higher.

What's Next

“Fundamental concerns have weighed on the sector for the past month,” reports Bloomberg. “The S&P 500 Managed Care Index has declined 5.2% this year, after being up about 8% just last month. The benchmark plunged nearly 3% after JPMorgan’s survey came out last week.”

There's no rest for the weary. IHF will likely face political headwinds again in a few weeks when the next round of Democratic debates are aired.

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