Dive Brief:
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Many fund managers will continue investing in health systems, health insurance companies, and biotech firms even as Congressional Republicans and President Donald Trump try to reverse the Affordable Care Act (ACA), Reuters reported.
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Fund managers from Fidelity, Gamco, Thornburg, and other investment firms told Reuters they expect many features of the ACA to remain in place even if it is repealed.
- Investments in healthcare stocks have slowed since Donald Trump was elected on November 8, with the healthcare sector gaining only 2% on the S&P 500 since then compared with overall growth of 6.3%.
Dive Insight:
There has been a lot of talk about repealing the ACA since the election gave Republicans control of Congress and the White House. There has also been action toward repeal, though some of the impacts have yet to be determined. President Trump signed an executive order targeting the ACA and Congressional Republicans have paved the way for repeal with passing a budget resolution with instructions on budget reconciliation. However, this has not deterred investors.
While healthcare stocks fell after President Trump was elected and have not kept pace with the rest of the market, investors do not anticipate a “whole lot of disruption,” Eddie Yoon, portfolio manager of the Fidelity Select Health Care fund, told Reuters. Some hospital stocks are even outperforming expectations. For instance, stocks for Healthcare Corporation of America are up 7.9% in the new year and are trading higher than they were on Election Day.
Since the election, healthcare industry experts have warned of the dire consequences that materialize if the ACA is repealed. However, investors are not the only ones who have speculated that future health reform legislation will be as dramatic as the rhetoric employed by politicians has suggested. Many political insiders predict that Republican-led health reform will modify existing policies to reflect Republican principles, but that it will rely on the framework established by the ACA, according to Axios.
Some polls support the idea that Republicans are softening their stance on the ACA. Among Republican voters responding to a Kaiser Family Foundation poll, 69% said they favored repeal of the ACA repealed in October compared with 52% in November. More recent data from the Kaiser Health Tracking Poll shows that 49% of the general public support repeal and 47% are against it.