Health Stocks Break to New Highs Despite Trump’s Cost Speech

(Bloomberg) -- Health-care stocks broke to a record high along with the broader market, shrugging off President Donald Trump’s new measures to boost the cost transparency of medical services.

The S&P 500 Health Index rose as much 1.8% to the highest level since September 1989, as the president spoke about the new rules Friday. Shares of managed-care and hospital companies are pushing the sector higher as industry groups representing them have criticized the proposals, and the hospital industry said it would challenge it in court.

A new plan from Democratic hopeful Elizabeth Warren earlier may also be contributing to investors’ optimism. The senator’s proposal shows “a significant transition period” for implementing a single-payer system in the U.S., which is a shift from her original Medicare for All plan, according to Bloomberg Intelligence Brian Rye.

The senator “appears to recognize the difficulties associated with implementing a single-payer plan, associating herself with a more moderate plan to open up Medicare to people aged 50-64,” Rye said.

Health Stocks Break to New Highs Despite Trump’s Cost Speech

The Health Care Select Sector SPDR Fund, known by its ticker XLV, also broke to an all-time high on Friday, which is seen as a bullish signal for the near term, Jefferies health strategist Jared Holz noted to clients.

“We continue to think the sector will trade well into YE and 2020 as a multitude of more macro/political factors have been better absorbed in the market as reflected by valuations and we see sentiment starting to improve modestly.”

Health-care stocks have posted the best performance among major industries in the S&P 500 since the third-quarter earnings season began in mid-October, according to data compiled by Bloomberg. The rally is a turnaround from the first nine months of the year, when health-care trailed its market peers over drug-pricing regulations and Medicare for All insurance proposals.

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