A Clear Beneficiary of the Mid-Term Elections

When Congress passed the Affordable Care Act (Obama Care) in 2009, the democratic party had a 39-seat majority in the House and a 9-seat majority in the Senate. At the foundation of the Act were subsidies that made health Insurance more affordable and broadened the base of subscribers to make it possible to cover pre-existing conditions. The enhanced Affordable Care Act subsidies expired on December 31, 2025. High on the agenda of today’s democratic party is to bring back those enhanced subsidies.  Last night’s elections produced the necessary majorities in both houses of Congress to do so.  

Bringing back enhanced subsidies will be very positive for the healthcare industry, as evidenced by the rise in these stocks the morning after the elections. Among them was an ETF in our portfolio that blankets the industry.

Invesco’s S&P 500 Equal Weight Healthcare ETF (RSPH)

One of the main criticisms of most healthcare ETFs is that they are dominated by a relatively small number of large companies, such as Johnson & Johnson, which distort the performance of the typical healthcare ETF portfolio. By investing in the 65 healthcare stocks represented in the S&P 500 Equal Weight Healthcare Index, this ETF weighs each holding evenly. Both the Index and RSPH are rebalanced quarterly. This approach has given RSPH a superior performance to the large healthcare ETFs.

In our July issue of Sound Advice, we emphasized that the healthcare sector had been languishing during the past three years. Returns were close to zero in 2023 and 2024. Some life returned in 2025, but the return for the entire three-year period was far below the rest of the market. The wake of this abandonment had left this sector undervalued and replete with investment bargains. A growing number of investors began agreeing. A rotation of capital began coming from other volatile sectors, seeking less risk and more certain upside prospects.

Over the long term, the healthcare sector is certain to continue to benefit from the expanding use of AI. Already, X-rays, CT scans, and MRIs are scanned and analyzed more reliably and accurately. AI is particularly useful in analyzing large data sets for discovering new treatments and medicines, as well as addressing the sector’s nemesis, cost control, by improving administrative efficiency, patient monitoring, and data management. 

In addition to being prime candidates for new AI technologies that are bound to improve efficiency and accelerate growth, healthcare stocks have several traits that make them desirable long-term investments. They are well-suited for an aging population, which exerts disproportionate demands on the healthcare industry. As the world’s population continues to age, this trend is inexorable, making the healthcare sector defensive in nature and more insulated from economic cycles than other sectors.