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RFK Jr. Effect: "Rotation Out Of Healthcare Stocks Shows No Signs Of Abating"

Tyler Durden's Photo
by Tyler Durden
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Shares in vaccine makers and healthcare firms tumbled after Donald Trump nominated Robert F. Kennedy Jr. to lead the Department of Health and Human Services last month. Weeks later, Goldman analysts on Friday told clients that the "post-election theme of rotating out of the healthcare sector still shows no signs of abating."

The team of analysts led by Asad Haider pointed out that the Health Care Select Sector SPDR Fund's (XLV) year-to-date performance relative to the S&P 500 is now tracking toward the worst in three decades. 

"With sentiment so despondent across so many segments of HC, we are fielding increasing inbounds on what it will take to reverse the generalist bleed," Haider said. 

According to the team of analysts, here's what needs to happen to stop the hemorrhaging in healthcare stocks:

"Outside of a few narrow segments where there still seems to be some generalist appetite on optimism on the fundamental outlook and/or execution (LLY, parts of MedTech, Distributors, link), this is tough to know -- though at the highest level, what seems needed for a broad sector recovery is likely some combination of:

  1. A macro shock (this week's inline payrolls number and above expectations UMich consumer sentiment index reading, link, are arguably not helpful for the marginal $$ into HC, outside of tactical risk-on expressions in segments like the XBI);

  2. Policy clarity (where it remains to be seen what the "clearing-event" will be, given the wide range of debates around potential outcomes); and

  3. Positive earnings revisions (which are still lacking across broad swaths of HC; link, and seem particularly important). Barring these, the bar for a sustained sector rebound is likely to remain elevated (valuation and dividend yields are not really resonating as primary reason to dip into the sector) and hedge-fund driven volatility (link) seems likely to continue." 

Timeline of events that triggered selling pressure across healthcare stocks...

The industry's performance relative to the S&P 500 year-to-date is some of the worst in three decades. 

Here are the subsectors getting hammered the most. 

Three decades of critical events affecting healthcare valuations.

President-elect Donald Trump joined NBC News' "Meet the Press" on Sunday. Trump provided more insights into what RFK Jr. will do once he gets into HHS. 

Should the dip in beaten-down healthcare stocks be bought, or does a further clearing event need to occur first? Even Goldman analysts were not entirely sure.

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