The Story:
Many of the Democrats in Congress are determined to move beyond the Affordable Care Act of 2010, toward a single-payer insurance system. Meanwhile, the Republicans, both in Congress and the White House, continue to oppose the ACA, though they are still quite vague about any specific replacement. The third force, the one that stands behind the ACA, also known as ‘Obamacare,’ is: Wall Street.
Wall Street’s View:
One measure of Wall Street’s sentiment about Obamacare is the value of the iShares US Health Care ETF (IYH). This is a fund designed to track the investment results of an index composed of US equities in the healthcare sector.
Suppose one had invested $10,000 in this ETF on March 23, 2010, the day of the passage of the ACA. How would that principal have grown? Its value would have increased in a fairly steady manner until the middle of 2015. It would have been worth more than $26,000 by that time. It would then have hit choppier waters, and would still have been in the neighborhood of $26,000 two years latter, in the middle of 2017. But …
In the middle of 2017 efforts to replace Obamacare failed in the US Senate, on the downward pointing thumb of Senator McCain At that point, health care companies in the US (which had accustomed themselves to the system) received a stimulus in the form of a higher level of confidence that the ACA rug was not about to be pulled out from under their endeavors. The health care ETF started a big upward move at that time. The initial $10,000 would have been more than $34,000 by October 1, 2018.
In 2019, though, that ETF has stagnated again. As of this writing, the principal would be worth slightly less than it was worth in October. The twin threats to the ACA status quo, from left and right, have both intensified and this may well account to the pause on growth in the health care industry that stagnation represents.
The Thing to Know
It is safe to say not only that Wall Street has made its peace with Obamacare, but that the health care investing portion of Wall Street has learned to thrive with Obamacare, and regards any marked move against it (for Senator Sanders’ reasons or for President Trump’s) as a threat.
