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Market Reaction to Healthcare Reform

Despite what seems like a further nationalization of health care, the healthcare stocks, particularly in the pharmaceutical space, rallied today and helped buoy the overall markets.  The SPDR Pharmaceuticals ETF (XPH) was up 1.8% while the broader Vanguard Healthcare ETF (VHT) and iShares Down Jones U.S. Healthcare Sector Index Fund (IYH) were up .9% and .7% respectively.  My guess is that the market viewed the potential 32 million new customers as a gain that offsets any reduction in profit margins.  I guess only time will tell whether that is an accurate assessment.

What is more interesting is that the NYSE Healthcare Index seems to have consistently liked positive outcomes for the health care plan while pulling back when the reform’s passage was questioned with Scott Brown’s win:

Rally on good news for the healthcare reform, pull back when the reform is questioned

Maybe the positive correlation between healthcare stocks and the reform bill has nothing to do with an increasing customer base and everything to do with an increased presence of health insurance companies at the political table…

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