The healthcare sector, the second-largest sector allocation in the S&P 500, is hardly impressing this year. Year-to-date, the S&P Health Care Select Sector Index is lagging the S&P 500 by about 140 basis points.
Still, the sector is in the green on the year and with much of the lethargy blamed on Election Year jitters, one of the most obvious headwinds healthcare equities are facing will soon abate.
That could open the door to opportunity with the Direxion Daily Healthcare Bull 3X Shares (NYSE:CURE). CURE attempts to deliver triple the daily returns of the aforementioned S&P Health Care Select Sector Index.
Why It's Important
Historically, healthcare stocks languish in presidential election years so it's not surprising the group is lagging the broader market in 2020, but the good news is that CURE could be a winner regardless of the presidential outcome, though the leveraged exchange traded fund could offer some near-term upside if former Vice President Joe Biden defeats President Donald Trump.
“We see healthcare policy as relatively stable in the first year of a potential Biden administration – as opposed to early in the first terms of President Barack Obama and President Donald Trump, when it was a principal focus of the policy discussion,” according to BlackRock research.
Other factors make CURE a near-term idea for aggressive traders. Those include the potential for good news on the COVID-19 vaccine front over the next several months and a likely renewed focus on defeating the coronavirus starting in 2021.
“COVID response, economic recovery and climate-related initiatives would likely take priority in 2021, in our view,” notes BlackRock.
Soon after Election Day, the Supreme Court will yet another case that could strike down or weaken the Affordable Care Act, also known as Obamacare. However, the likelihood of the court, despite its conservative leanings, obliterating that legislation is viewed as unlikely.
Leaving Obamacare as is would be a boon for CURE as would limited action on lowering drug prices.
“Measures to curb drug price increases are a potential focus – regardless of the election result. Yet we would expect only modest action against the backdrop of the pandemic, as drug makers are playing an important role in vaccine development and COVID response,” according to BlackRock.
Bottom line: Catalysts are in place to make CURE a cure a credible trade into year end and perhaps in early 2021, too.