‘Medicare for All’ Is Hammering Health Care Stocks. For Now.

The difference, or spread, between the market’s aversion to health care stocks, the most-hated sector, and its attraction to financial services, the most-loved, was extraordinarily wide. The polarization was greater than it has been for 99.93 percent of all trading days in the American stock market since the start of 1990, Bespoke found. When such extremes in market sentiment have occurred in the past, the depressed sector has rarely bounced back quickly, Paul Hickey, a Bespoke founder, said in an interview.

“When momentum is this extreme, it often takes some time to recover,” he said.

A Bloomberg article compared the rout in health care stocks to the “‘Dark Days’ of the Financial Crisis,” when, in addition to the crisis afflicting the overall stock market, the sector grappled with uncertainty over what, eventually, became the Affordable Care Act, a.k.a. Obamacare.

But as I’ve written, the Affordable Care Act turned out to be a boon for managed care companies, which profited handsomely despite continuing to gripe about the government’s expanded role.

In the 10 years through March, for example, UnitedHealth’s shares returned 1,345 percent, including dividends, dwarfing the 376 percent total return for the S&P 500. UnitedHealth trailed Apple’s total return of 1,593 percent and Amazon’s, 2,649 percent, but it was far better than Google (now a unit of Alphabet) at 596 percent.

At some point, stocks that fly that high simply drop in value. For health care stocks, this may just be one of those times.

But if profits for major health care companies remain strong, as expected, their share prices could begin to stabilize. And if the presidential cycle starts to shift in their favor, they could resume their path upward.

It’s even possible that many health care companies, which already do extensive government business, could find ways of prospering under some version of Medicare for All, especially one that reserves a substantial role for private companies.

It has been an awful stretch for health care stocks. But it would be foolish to underestimate the companies’ ability to adapt under duress and to ultimately profit, no matter who is in power.