Mizuho Healthcare Team: Guide to Investing for Election 2016

Sheryl R. Skolnick, Ph.D.; Ann Hynes and Irina R. Koffler
Sheryl R. Skolnick, Ph.D.; Ann Hynes and Irina R. Koffler
November 7, 2016

Mizuho's Healthcare Team has collaborated to update our January work showing that healthcare outperforms post-election when gridlock reigns, and give our joint view of the best ways to play the possible outcomes. Clip our 'traders' guide' on page 2. Second, we outline the HC agendas of each presidential candidate. Third, in concert with polls that still show Clinton and the Democrats taking the White House and Senate in very tight races, we see the best of all realistic outcomes coming true: Gridlock reigns.

The S&P HC Index performance was analyzed over the last 12 election cycles. As before, HC outperforms the S&P500 when gridlock reigns and underperforms when it doesn't. But in this report, we give a bit more background on why that's the case and why, even with a Democrat in the White House, so long as the GOP controls the House, single payer as a risk can be taken off the long list of investor concerns.

We also explore in some depth what could happen under the various gridlock scenarios; Not all causes of gridlock necessarily have the same outcome. For example, given the tension in the GOP, even if the House stays red and Trump wins, it's not clear whether the Trump or Congressional Republican (Ryan) health plan would be the mandate of the day. More, even if Clinton wins and the House stays red, the pharma & related companies may not be in the clear from continued scrutiny and investigation of their pricing practices. When consumers are hurt, issues can become bi-partisan and don't forget that the Administration controls the DOJ and OIG.

We also present poll data from Friday and Sunday, using three different sources (538, HuffPost and Cook), all of which is subject to rapid change in this very close and tense election. As of this writing, it still appears that Clinton will win but without a landslide...and without a mandate. But if 538 is right about the polls being skewed, then Trump has a better chance of winning. From a market perspective, its this intense uncertainty that matters and likely makes for drama on Monday and Wednesday before we all settle down for the long term.

Finally, no matter what happens in this election, we think that budget math eventually will prevail: the rate of increase of spending on HC is likely unsustainable because the number of 'capitas' is rising too fast and per capital spend (probably) can't be zero. That means, we think, long-term reductions in capacity in high cost settings, for high cost/low value drugs and devices and sustained moves toward Right Care, Right Time, Right Place, for the Right Reason, at the Right Cost. In the long run, even politics seems to be 'always and ever' about the money.

View the full research report for important disclosure and analyst certification information. Ratings and/or Price Targets may change. Refer to the US Equity Research Portal library for the most recent company research.

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