29.12.2016

Stoxx 600 Health Care Index: is the worst over?

by SAMT

Health-care stocks are one of the worst-performing sector in the S&P 500 so far this year, with shares down -1,87% compared with the broader index’s +13,18% gain as investors fretted about everything from Obamacare to drug prices.

Several investors and analysts said they expect a clearer view of the political outlook for insurers and drug companies after the presidential election. Both Republican nominee Donald Trump and Democrat Hillary Clinton have criticized drug prices and want to make adjustments to the health-care system.

The same fate has been shared by the European equity market, where the Stoxx 600 Healt Care Supersector Index had a decrease of -10,89% while the main Stoxx 600 Index closed with a loss of  -1,59%.

Historically speaking, the Stoxx 600 Health Care Supersector Index compared with the Stoxx 600 Index, as we can see in the table below, has always been an overperformer, but in the last three years,  the index started to lose its relative strength versus its main index.

400

A look at the last ten years of relative strength of the index shows us that in July 2016 we had the biggest and deep fall since January 2009, a period where the bear market started to fade away, replaced with a new uptrend began in March 2009. It is reasonable to think, that a defensive sector like healthcare, has been disadvantaged when the bull market started to take place.

400

Could it be the same pattern happen also this time? If we consider the relative strength curve, we see that the level is very close to the red uptrend line, so we could have some reaction to this event.

If we consider the weekly chart of the Stoxx 600 Health Care Index, we can notice that prices are touching the uptrend line and there is a divergence: these are sign of a possible recovery, but some price levels must be achieved. 

400

Looking to the daily chart, we can observe that price formed a double bottom at 650 level (38,2% Fibonacci retracement from the bull market started in 2009), touched two times, in February and November 2016, with a higher low of the oscillator (Macd). In July we had an important high at about 780, and this is the level to overcome to have the first confirmation that the healthcare European equity market has regained its strength. 

400

Mario Valentino GUFFANTI CFTe - SAMT Vice President – Swiss Italian Chapter – mario.guffanti@samt-org.ch

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Disclaimer: the above article is for general information and educational purposes only.  It is not intended to be investment advice.  Seek a duly licensed professional for investment advice.


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