It will take a Christmas miracle for the Health Care SPDR (ETF) (NYSEARCA:XLV) to finish 2016 in the green. With a dwindling number of trading days remaining in the year, XLV, the largest healthcare exchange-traded fund by assets, is down 3.2% year-to-date.
That puts XLV in position to notch its first annual loss since 2008, one of the worst years in recent memory for U.S. stocks. Things are so bad for the healthcare sector, the third-largest sector weight in the S&P 500, that XLV is the only one of the nine legacy sector SPDR ETFs likely to close 2016 with a negative performance.
A familiar refrain explaining the struggles of the healthcare sector in 2016 is election year rhetoric.
Regardless of one’s personal politics, it is impossible to deny that Hillary Clinton’s campaign-trail talk aimed at high drug prices hampered biotechnology and pharmaceuticals stocks. While biotechnology stocks and ETFs rallied immediately following Donald Trump’s surprising victory, that enthusiasm has waned as the president-elect has dispensed his own criticism of high pharmaceuticals prices.
That is potentially troubling for XLV and other basic healthcare ETFs because those funds allocate about two-thirds of their combined weights to pharmaceuticals and biotechnology stocks.
While the current environment for healthcare stocks and ETFs looks fraught with peril, things could change for the better in 2017. Consider these three healthcare ETFs as rebound plays in the new year.