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Is the 2017 Outlook for Healthcare Optimistic?

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Jan. 3 2017, Published 11:23 a.m. ET

Performance of the healthcare sector in 2016

The healthcare sector provided unimpressive returns in 2016. The Health Care Select Sector SPDR ETF (XLV), which tracks the performance of the healthcare sector, fell 2.5% in 2016.

However, the healthcare sector (VHT) rallied following the results of the US presidential election on November 9, 2016. XLV rose 3% from November 9–17, 2016. Since the election, most cyclical sectors have shown positive performances.

XLV’s major holdings Johnson & Johnson (JNJ), Pfizer (PFE), Amgen (AMGN), and Allergan (AGN) returned -0.42%, 5.7%, 6.4%, and 2.1%, respectively, from November 9–17, 2016.

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Change in policy

In the presidential campaign, Democratic presidential candidate Hillary Clinton supported the Patient Protection and Affordable Care Act, also known as Obamacare. President-elect Donald Trump said that he wanted to replace it.

The possible repeal of Obamacare could be an opportunity for various healthcare stocks. This change in policy in the healthcare sector could be an important driver for the sector in 2017.

Performance of XLV

XLV is currently trading at par with its 20-day moving average and ~2.5% below its 100-day moving average. When a short-term moving average crosses above a long-term moving average, it indicates a bullish price trend, and vice versa.

In the next part of this series, we’ll analyze the performance of the materials sector.

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