Why Healthcare Stocks Could Catch a Break This Election Year

Key takeaways:

  • So far, healthcare stocks have largely kept pace with the broader equity market’s rally in 2024, despite historically underperforming during the lead-up to a U.S. presidential election.
  • The sector could benefit from reduced uncertainty about which healthcare policies either candidate – both of whom have been president before – might pursue in office.
  • In our view, long-term growth trends look set to propel the sector higher under either administration’s plans.

In past U.S. election cycles, healthcare stocks have often underperformed as investors speculate how healthcare policy might change under a new president. That is not the case so far this year. In fact, the S&P 500® Health Care Sector has been largely keeping pace with the broader equity market, returning 8.9% year to date, compared with 10.6% for the S&P 500® Index.1

What’s different about the 2024 election? Both candidates have already been president – a rare occurrence in U.S. election history (the last instance was over 100 years ago in 1912, when former president Teddy Roosevelt ran against his successor, William Howard Taft). As such, investors seemingly have opted to focus on the candidates’ track records on healthcare reform, rather than campaign rhetoric.

We think this makes sense. Historically, healthcare stocks tend to underperform as investors anticipate reform, then recover once policy is enacted. For example, the sector lagged the broader equity market in the months leading up to the passage of the Affordable Care Act (ACA) in 2010, only to outperform in subsequent years as investors realized the ACA – which expanded healthcare coverage to millions of Americans – came with more net benefits for the industry than costs.