Pharmaceutical Stocks Get Bump after Trump Victory, but Industry Faces Headwinds Now

Trump Victory Gives Pharmaceutical Stocks a Bump

Whether through tweets, press conferences, or unscripted remarks, it’s becoming clear, that Donald Trump’s words have an immediate impact on the stock market.

Immediately following Donald Trump’s election victory in early November, healthcare stocks got a bump, with many thinking pharmaceutical stocks would be one of the big winners under a Trump presidency.

Healthcare and pharmaceutical stocks had been under pressure in the lead up to the election as investors presumed Clinton was destined to become the next president of the United States. In keeping with President Obama, a Clinton presidency would introduce drug-pricing pressures. Further, many healthcare insurers had said they were losing money after on the Affordable Care Act, colloquially referred to as Obamacare.

But, with Trump in the White House and Republicans in control of Congress, Obamacare is up in the air. And with it, many thought, price controls. Pharma stocks and healthcare stocks were early winners.

In the weeks preceding the U.S. election, the iShares Nasdaq Biotechnology ETF (NYSE/IBB) lost almost 18% of its value, falling from around $300.00 per share in late September to a low near $246.50 in early November. After the surprise election result, the iShares Nasdaq Biotechnology ETF was trading near $290.00 per share.

The PowerShares Dynamic Pharmaceuticals Portfolio ETF (NYSE/PJP) followed the same trajectory; down roughly 17% in the weeks before the election then rebounding 12%.

Trump Criticizes Pharmaceutical Industry, Stocks Fall

On January 11, Donald Trump held his first press conference since winning the November 8 election. Investors were looking for Donald Trump to go into detail about his economic policies, in particular, his plan to cut taxes and boost fiscal stimulus, which investors hope will send the markets even higher. That didn’t happen.1

Pharmaceutical and healthcare stocks got hit during the press conference after Donald Trump criticized the industry during the January 11 news conference.

In fact, healthcare and biotech stocks fell sharply during the news conference, right after Trump said drug makers are “getting away with murder” when it comes to pricing.

The iShares Nasdaq Biotechnology ETF fell approximately 3.5% during Trump’s news conference. The PowerShares Dynamic Pharmaceuticals Portfolio ETF faced a similar fate.

Not surprisingly, pharmaceutical stocks were hammered during the news conference with the nine biggest pharmaceutical companies on the S&P 500 losing roughly $25.0 billion in market cap in just 20 minutes. This included AbbVie, Amgen, Bristol-Myers Squibb, Celgene, Eli Lilly, Gilead, Johnson and Johnson, Merck, and Pfizer.2

This isn’t the first time this has happened either. In mid-December, Trump criticized the cost of Lockheed Martin’s F-35 program. His comments knocked a few percent off the company’s share price.3

Lockheed Martin’s share price took another hit after Trump reiterated his stance during the January 11 press conference, saying the F-35 program was way behind schedule and over budget.

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What this news conference shows us is that Donald Trump can create short-term opportunities for investors; whether it’s buying on the dip, shorting, or selling on positive news.

By the looks of things, Trump will present investors with a lot of these kinds of opportunities over, at least, the next four years. That’s because there are investing strategies that can help investors make money on a consistent basis—no matter what the broader markets are doing.

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To learn more about Learn-To-Trade.com’s stock market trading course, contact us at 416-510-5560 or by e-mail at info@learn-to-trade.com.

Sources:

  1. “President Elect Donald Trump Holds Press Conference,” YouTube, January 11, 2017; https://www.youtube.com/watch?v=fAkumy7_Pbc.
  2. “Big Pharma Lost $24.6 Billion in 20 Minutes During Donald Trump’s Press Conference,” Fortune, January 11, 2017; http://fortune.com/2017/01/11/donald-trump-press-conference-biopharma-stocks/.
  3. “Donald Trump,” Twitter, December 22, 2016; https://twitter.com/realDonaldTrump/status/812061677160202240.
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George Karpouzis is the co-founder of Learn-to-Trade and has been personally providing education and mentoring to over 3000 members since 1999. George has been trading in the stocks, options, futures and forex markets using technical analysis since 1986. With the help of advancements in trading technology the Learn To Trade program is now accessible worldwide. His background and passion for teaching brings an invaluable asset to our members. George is constantly striving to improve the program content and develop new strategic relationships for the benefit of the members. Add me to your G+

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