The SPDR Health Care ETF (NYSE: XLV) is ripe for some kind of move
in reaction to the passage of the Senate health care bill.
Chart Courtesy of StockCharts.com
Low volume and thin end of the year crowds may or may not react
to the passage of health care legislation. And a lot remains
to be worked out before the whole thing gets signed into law.
But one thing seems certain. This will be landmark legislation.
From a market standpoint, the insurance companies came out o.k. as they will
still be running the system. And drug companies have already raised prices, some
9%, in preparation for the eventual passage of the bill.
That leaves hospitals, medical equipment and materials companies, and biotech
as the potential bag holders, not to mention physicians, health professionals
at all levels, and patients.
There, the potential is mixed as some of the taxes and reimbursement cuts will
be aimed at these branches of the sector. The insurers will likely remain profitable
due to the increased numbers of patients that they will insure.
But the reimbursement cuts, and the hidden taxes, fees, and increased regulation
will likely cut into profits, and even into revenues and perhaps sales of equipment
companies. Hospitals are hard to predict at this point, given the fact that these
institutions often find money somewhere, and since Medicaid will be increased
by this bill, it could benefit hospitals, or at least keep things close to where
they are on a bottom line basis.
The sector has had a fairly good advance of late, especially the large cap drug
companies and the health insurers. But that was based on the assumption that
there would not be a significant bill passed. That means that it's now about
how the market interprets what has just happened.
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