Market Watch: Health Care Stocks Challenges in 2019

As a culture, health care stocks are safe-havens in times of broad market volatility. During 2018, it pulls back sharply upon being the best performer in the S&P 50 index. Health care stocks move to a broader market’s sleep sell-offs. All because of the myriad attention. That includes trade tensions, slowing corporate profits, and inclining interest rates.

As a result, in 2019, the market watch sees a huge risk ahead of health care stocks. That includes regulatory uncertainty, especially on political charged Affordable Care Act. That also includes the technical indicators signaling the bottom sector, and fiscal policy matters.

Top Four Health Care Stock in Year-to-date Performance

In 2018, there are four health care stocks performing not less than 16%. Firstly, Molina Healthcare with 53% year-to-date performance. Secondly, the Tenet Healthcare with 27%  year-to-date performance. Thirdly, Horizon Pharma PLC with 26.2% year-to-date performance. Lastly, Allergan PLC with 16.5% year-to-date performance.

Now let’s turn our focus on the challenges health care stock may face this year.

The Affordable Care Act (ACA) Under Pressure

The oldest and largest exchange-traded fund in the division is the Health Care Select Sector SPDR Fund. Since December last year, it falls by double-digit figures. All because of the news regarding the federal judge ruling the ACA, or the Obamacare to become unconstitutional. The stocks as hospital operators including Tenet Healthcare Corp and Molina Healthcare Inc declines lower than the health care sector.

Meanwhile, as ruling brings health care off their safe-haven, investors might overreact on potential risks. Obamacare is already challenged by the increasing polarize political views in the United States. Meaning this isn’t the first time dare for Obamacare. The ACA created millions of fresh customers as they expand access to health insurance. It has been doing great for health care providers. Therefore, any replacement policy structure is likely to decrease access to health insurance. That will grab on the revenue of the providers.

The Fiscal Policy Concerns

In Charles Schwab’s recent sector roundup, it cites negative factors on the health care sector. That includes fiscal policy matters. The report says, “The current fiscal situation in Washington creates uncertainty regarding the health care sector. Certain funding mechanisms could be changed as Congress deals with growing deficits.”

The Health Care Bottoming

In the S&P 500, health care is the only sector with double-digit returns for their shareholders in 2018. According to the data from DataTrek Research, that spells bad news for the investors.

The co-founder of DataTrek, Nicholas Colas wrote: “The upshot here is that health care may look like a safe harbor in the current storm, but its current weighting shows it is very likely at a relative top versus other S&P 500 sectors.”

The outperformance of health care stocks brings its S&P 500 to 15.6%. That was a size only approached six other periods since 1979. However, there could be more for this trend. Since last year, as health care weigh, a broader market starts to outperform. A piece of good news for the investors suffering from the sharp 16% loss for the S&P 500?

The Bullish View

Elsewhere, putting negative headwind aside, other markets tells that this is now a good time for value investors to purchase health care stocks while it’s on the dip. As Charles Schwab cites, health care firm’s strong balance sheets, its attractive dividend, and the developed cost structures.

At the same time, the boosting demand could push top line growth. Increase in demand for health care products and services is expected. It fuels by the trends in the aging U.S. population.