Under Clinton or Trump, drug stocks lose: Analyst

Published Tue, Feb 23 201611:42 AM EST

The importance of drug pricing and other health-care issues in the presidential campaign will keep a lid on health-care stocks, according to a Wall Street analyst. Since Hillary Clinton's September tweet blasting drug price gouging, the S & P 500 biotechnology index is off by double digits, compared to the broader benchmark being down just about 1 percent. "The U.S. presidential election has shifted into overdrive and health care is again one of the campaign trail's prominent and controversial issues," Kelly Bogdanov, vice president and portfolio analyst at RBC Wealth Management, wrote in a note to clients Feb. 16. "As the candidates kick around this political football, share prices and sentiment have soured. Investors should approach the near term with caution." A Donald Trump presidency, which could get another major boost from the Nevada caucuses Tuesday, won't be that much friendlier to the industry either, according to RBC. "In addition to Clinton , Republican contender Donald Trump and Democratic candidate Bernie Sanders support empowering Medicare to negotiate lower drug prices with the pharma and biotech industries," the report said. It's tough for any politician — Republican or Democrat — to go against a stance that is gaining widespread support. A Kaiser Family Foundation study cited in the report said 83 percent of Americans favor giving Medicare this power. "While it is not uncommon for candidates to propose major changes to the health-care system in a presidential election year, the difference this cycle is that the rhetoric has intensified on the campaign trail and is coming from both political parties," wrote the analyst. Read More Santoli: Hedge funds' pain could be your gain Source: Kelly Bogdanov of RBC Wealth Management, P/E based on forward earnings estimates RBC Wealth Management analyzed the price-earnings valuations of the pharmaceutical and health-care sectors during "the previous two presidential election cycles when health care was a prominent issue." The firm found current valuations are not yet cheap overall relative to the S & P 500 in those cycles. Even though negative in the short term, Bogdanov believes health care will do well over the long term after the election. She thinks Congress will have difficulty passing any major health-care initiatives and U.S. health-care spending should continue to grow due to demographic trends. "We expect our cautious stance on the health-care sector to be a temporary one," the analyst said in the note. Read More Top investor: Buy this beaten-up railroad stock

Donald Trump and Hillary Clinton

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The importance of drug pricing and other health-care issues in the presidential campaign will keep a lid on health-care stocks, according to a Wall Street analyst.

Since Hillary Clinton's September tweet blasting drug price gouging, the S&P 500 biotechnology index is off by double digits, compared to the broader benchmark being down just about 1 percent.

"The U.S. presidential election has shifted into overdrive and health care is again one of the campaign trail's prominent and controversial issues," Kelly Bogdanov, vice president and portfolio analyst at RBC Wealth Management, wrote in a note to clients Feb. 16. "As the candidates kick around this political football, share prices and sentiment have soured. Investors should approach the near term with caution."

A Donald Trump presidency, which could get another major boost from the Nevada caucuses Tuesday, won't be that much friendlier to the industry either, according to RBC.