By now you know the health care law — known colloquially as “Obamacare” and formally as the “Affordable Care Act” — has been upheld by the Supreme Court.
What you might not know, however, is how the decision affects your portfolio. So here’s the score in one sentence:
In the short term, the market will continue to suffer due to uncertainties, and in the long term, the health care sector will be your best investment opportunity.
The fact is that the Supreme Court decision hasn’t provided a clear end to the health care debate. Congressional Republicans will mount a challenge to the bill this summer, and an election in November means anything can happen. Then, of course, there’s the big question of who will pay for what.
It’s also worth noting that the health care ruling wasn’t even the biggest thing on many investors’ minds this week. The eurozone remains in crisis, with Spain now borrowing at nearly the rate I get on my Visa card (should I ever carry a balance). There also are fears that this is the Year of the Draggin’ in China as emerging markets slow, and concerns that the ugly job market in America could send us into a double-dip recession.
As for the long-term hopes of health care stocks, forget about legislation and start thinking about simple demographics. Baby boomers will create a huge need for health care in America, and it is projected that by 2030, one in every five Americans will be older than 65. These are “customers” that need health services no matter who is providing or paying for those services.
That’s the quick take on the SCOTUS ruling and what it means to you as an investor. If you want more details, I picked the brains of some of Wall Street’s top investors and analysts to see what they had to say. Here are their comments, and some links for further reading:
Joshua Brown, The Reformed Broker
“What’s happening today is a realization that the May correction is still in progress, nothing from the first two weeks of June has really meant anything at all. The market may have sold off more after the decision but it was down anyway, Spanish bond yields above 7% and weakness from Germany’s employment number were going to mean a risk-off day here regardless.”
Read more on Josh’s blog, TheReformedBroker.com.
Dan Burrows, InvestorPlace.com
“Now that the overhang of the Affordable Care Act’s constitutionality has been removed, health care stocks could actually widen their outperformance if defensive names stay in favor. Remember: As much as the market hates bad news, it hates the unexpected even more. The Supreme Court’s ruling leaves much of the sector’s costly preparations of the last few years in place. More important, a $2.7 trillion industry representing 18% of the economy at long last knows where it’s headed.”
Read Dan’s full assessment of the bullish case for health care stocks.
Paul R. LaMonica, CNNMoney
“So is this the disappointment that Obamacare was upheld sell-off or disappointment that the EU summit is likely to change nothing sell-off?”
Dan Wiener, The Independent Adviser for Vanguard Investors
“The Supreme Court’s decision still may be debated on the political front, but it lifts a huge cloud of uncertainty for investors who might have avoided the health care sector while the case was in process. Health care is an anomaly; a sector that has been less risky, overall, than the stock market while also producing above-market returns over time. All long-term investors should be ‘overweight’ in the sector (which currently makes up about 12% of the broad U.S. stock market). And, as you probably know, I believe there are some terrific active managers who can (and have) outperformed the broad health care indexes, including one of the best — the team at Wellington Management that runs Vanguard Health Care and Hartford HealthCare.”
For more on Dan’s optimism for the health care sector after the ruling, check out this full post on InvestorPlace.com.