Are health-care stocks coming down with something?
They're the only group in the S&P 500 index posting losses in 2016 through last Friday, and are on pace for the first yearly decline since the bull market began in 2009. Among the 10 biggest single-stock declines in the benchmark gauge this year, six are health-care companies.
The weakness is a departure from the past five years, when health care's 128-per-cent advance through 2015 ranked ahead of any other group. As of Tuesday, they're down 2.6 per cent in 2016 as investors assess how the industry will fare should Hillary Clinton be elected U.S. president. The group posted a 3.3-per-cent decline last week, the biggest five-day loss since February.
"You have a perfect storm – you obviously have the headline risk associated with the election," Craig Sterling, head of U.S. equity research at Boston-based Pioneer Investment Management, said by phone. "There's a much brighter light on the whole system. Whether this is temporal or not, it's hard to know. If Hillary Clinton gets elected, it seems to be like there will be continued interest in it."
Drug makers have become political targets during the election season. Valeant Pharmaceuticals International Inc., Mylan NV, Turing Pharmaceuticals LLC and others have been the focus of congressional hearings, and Ms. Clinton, the Democratic presidential nominee, has called out specific companies for price increases on old drugs. Last week, a tweet by Senator Bernie Sanders, where he cited Ariad Pharmaceuticals Inc.'s "greed" for raising the price of a cancer drug, sent the company's shares down as much as 15 per cent.
That concern is mounting as Ms. Clinton's polling lead over Donald Trump widens and amid the possibility of Democrat control in Congress. At the same time, there's been an overall shift in 2016 away from bull-market favourites like biotechnology and consumer-discretionary shares and into stocks with sturdier defensive credentials.
"There's biotech, there's managed-care and there's hospitals, and they all have their different issues right now," Dan Clifton, head of policy research at Strategas Research Partners in Washington, said by phone. "Pharma and biotech probably have more at stake in this election than any industry."
The S&P 500 is on track for an October drop, a month that has yielded gains in five of the past six years. The benchmark is down 1.3 per cent for the period so far after capping the first back-to-back weekly declines since August.
On Tuesday, the S&P 500 health care index gained 1.1 per cent.