US Markets

US Trust president gives the 2 reasons why he likes health-care stocks

Demand offers big opportunity in health care stocks: Pro

Political risks aside, health-care stocks are a good investment thanks to the industry's devotion to research and development and changing demographics, U.S. Trust's Keith Banks said Wednesday.

"There's just a very powerful demographic trend with the aging baby boomers globally that's going to drive the demand in this industry," the president of the U.S. Trust at Bank of America Private Wealth Management told CNBC's "Squawk Box."

"Not to mention the fact that the biotech area, which actually has done quite well this year and has been one of the drivers of the health-care performance, a lot of innovation, a lot of new drug discovery," Banks continued.

But Washington politics could pose a risk, with President Donald Trump tweeting on Tuesday that he has plans to spur competition in the pharmaceutical industry to bring prices "way down," which in turn could harm innovation.

"If it swings too far in that direction, I do think it could pose a risk," Banks said, referring to the government's involvement in negotiating drug prices. "But right now, we're not overly concerned."

Appearing in the same "Squawk Box" interview on Wednesday, Deutsche Asset Management Chief Investment Strategist David Bianco detailed the risks of federal involvement in drug pricing.

"I think if they get heavy-handed on that, even with using the bully pulpit, all you're going to do is cause these companies to pull back on R&D," Bianco said. "If you tell companies, 'You're charging too much,' the first thing they do is pull back on their investments, not their profits."

Such a move by the government could also affect the economic recovery by eventually bringing about inflation, Bianco contended.

"What causes inflation is when governments interfere with markets," he said. "And I think health care is one of the only areas where we see some inflation, and as long as we let markets get more involved in that space and companies innovate, I think that's an area where some of the inflation pressure comes back, even on the pricing that we see with drugs."

Still, Bianco said his firm has been advising clients to own health stocks due to the industry's promise and innovative efforts.

"When we look at the health-care sector, the demographics are still there pointing toward demand growth. But importantly, we still see supply," Bianco said. "There's been some challenges on the pipelines, but this is an industry that still innovates, invests heavily in R&D, and is, I think, a big part of playing a role in bringing down costs by being more efficient."