Healthcare is an increasingly expensive component of the U.S. GDP that is often targeted by politicians for government intervention, especially in years of presidential election. It constitutes the second largest sector of the S&P 500, with a current weighting of 14%+.
We examine the impact of presidential elections on stocks in general and on health care stocks in particular. Using data for the years 1998-2019, we find that 1) in election years, stocks generally underperform relative to non-election years; 2) healthcare stocks underperform the broader market in election years, however not in non-election years, and 3) the “Presidential Election Cycle”, a popular market axiom that stocks underperform in the first half of a presidential term and underperform in the back half, does not fully hold true in the twenty-first century. These results have significant implications for investment strategies followed by both investors and traders.
