Healthcare Stocks Face Volatility as Congressional Shifts Loom Market Gridlock
Healthcare stocks face uncertain futures as Democrats prepare for Congress. Learn how political gridlock and valuation shifts impact pharma and medtech.
POLICY WIRE — New York, USA — The healthcare sector may find it difficult to maintain upward momentum as Democrats prepare to assume control of Congress.
Jared Holz, a sector specialist at Mizuho, noted that the industry’s trajectory remains clouded by the high likelihood of legislative stalemate between opposing parties.
Speaking on CNBC’s “Fast Money” Wednesday, Holz suggested that significant policy changes are unlikely over the next two years. He advised that while holding broad exposure might not be ideal, investors could identify specific opportunities.
Holz pointed out that pharmaceutical stocks are currently trading at higher valuations than technology stocks for the first time in two decades, leading him to reduce his exposure to the sector in favor of medical technology.
The State Street Health Care Select ETF (XLV) saw a 3% surge in the day following the election results.
Holz described an unusual trend where various market categories that rarely move together did so in unison, a phenomenon observed just before healthcare participated in a broader Wall Street sell-off on Thursday.
According to the analyst, a major catalyst for the sector could emerge if a Democratic candidate secures the presidency in 2028.
He remarked that a reversal of certain Trump-era strategies could provide a strong performance boost for healthcare, though he emphasized this outcome depends on Democrats maintaining control of both the House and the Senate.
For those holding long positions in the industry, Holz advised that each subsector requires a unique strategic approach.
He expressed skepticism regarding whether recent regulations will be overturned in the near future. However, he noted that if a reversal does occur, medical device stocks currently trading near multi-year lows would be attractive targets.
The State Street Health Care Select ETF finished the week essentially unchanged. Despite this, since President Trump took office in January 2025, the fund has gained approximately 32%, outperforming the S&P 500 by nearly 9 percentage points.
Reporting by Policy-Wire (PW)
