Managed-care stocks were soaring Wednesday as investors bet that Washington will stay divided—keeping big changes in health-care policy off the table.
Managed-care stocks historically rally after presidential elections as the political uncertainty recedes, regardless of which party prevails. We won’t know the outcome of this year’s presidential race or various Senate contests for some time. But a relief rally may be under way as it becomes clear that the feared “blue wave” hasn’t materialized and that control of Congress may stay split between Democrats and Republicans.
(ANTM) was up 12.5% Wednesday afternoon;
was ahead 14.8%;
was up 11.9%;
gained 7.3%; and
was up 4.1%.
(CNC), a managed-care company focused on Medicaid plans, was rallying just 1%.
was ahead 3.3%, while the
Health Care Select Sector SPDR
(XLV) exchange-traded fund was ahead 5.6%. Barron’s wrote favorably about managed-care stocks, highlighting Anthem, in a recent story.
While the results of the presidential race remained uncertain, it looked as if Congress would remain divided. That outcome could change after all the votes are counted, and Democrats still have a shot at claiming a Senate majority. But they would have to win tight races in North Carolina, Georgia, and Maine, where Republican candidates have taken initial leads.
A divided government may be the best outcome for managed-care stocks. It reduces the chances of major policy changes, such as Democrats’ “Medicare for all” proposal. And it lowers the chances of big corporate tax increases or new fees on the industry.
“We would expect MCOs to meaningfully outperform the S&P 500 over the next 12 months if the Senate majority is narrow—whether in favor or Democrats or Republicans—and whether the president is Biden or Trump,” SVB Leerink analyst Stephen Tanal wrote in a note Wednesday, referring to the stocks of managed-care organizations.
History is on the stocks’ side. The S&P Managed Care Index posted gains from election day to year-end in five of the past six elections, he noted, averaging a return of 13%…