Healthcare stocks are getting slammed today after President-Elect Trump held a press conference and during it had some harsh comments surrounding drug pricing. The Healthcare Select SPDR (XLV) is down over 1.5% on the day. Damage to the sector in individual names can be much worse.
Allergan Plc, (AGN) is down nearly 3%, while shares of Pfizer (PFE) are down 2.5%. As if things couldn't get harder for Teva Pharmaceuticals, it is down almost 4% on the day. (See: Is Teva A Value Trap)
It just seems like every time the Healthcare sector starts to get it legs back under itself, something happens to chop it down. The XLV was actually, up about 2.5% to the start the year today. As of right now, at $70.34 it is up only 70 bps. In a few seconds, the market erased two weeks worth of gains.
Drug pricing had been a key issue throughout the Presidential election and seems to be a critical issue of the Trump Administration still. However, no plans on how to handle this problem have been announced, and it is likely we are still a few weeks away from getting more details. Although, my interpretation of clues, seem to indicate it will come from increasing competition.
My only suggestion is that the volatility in the space is going to continue, the market is going to continue to have shocks like the one we just saw today. Eventually, the market will begin to price in the effects of things like today's press conference. For now, this is all new and the market is still trying to digest how to handle these situations best.
The biggest problem that investors face regarding the Healthcare sector is the unknown. We simply do not have enough facts to make a determination as to how the policy will be shaped. Until we get past this uncertainty you are likely to have more shock session like today, not just in Healthcare, but all sectors of the market.