Are Healthcare Stocks a Risky Prescription in a US Election Year?

Despite conventional wisdom, political uncertainty doesn’t necessarily pose acute risks to the healthcare sector.

In November, Americans will head to the polls to elect a president, reorder Congress, and weigh in on countless state and local races. Investors often view healthcare stocks as a risky prescription in election years, but the historical record tells a different story. And this time, the prospect of a divided government could be a mitigating factor.

Even minor shifts in political power can result in new legislation with meaningful implications for healthcare stocks. At first blush, 2024 would seem to be no exception. Drug pricing is a hot topic, with lawmakers on both sides of the aisle taking aim at the high cost of prescription medicine.

Perception vs. Reality: Healthcare Stocks and Politics

It’s true that public policy can influence healthcare stocks, but political uncertainty doesn’t always equate with market turbulence. In fact, the healthcare sector hasn’t shown any consistent return patterns or extreme volatility in election years (Display).

Healthcare Performance Has Been Inconsistent in Election Years

Why the disconnect between perception and reality?