Broadly encouraging markets and continued investment initiatives have paved the way for the healthcare sector to become one of the top performers this year. The Health Care Select Sector SPDR ETF (XLV) surged 3.1% in 3Q17. Additionally, President Trump has failed repeatedly to repeal the Affordable Care Act (ACA), also known as Obamacare. This has protected gains for several sections of the sector.
Moreover, investors no longer have to deal with fears related to over-pricing of drugs, with political voices on this issue mostly absent in recent times. Moreover, a higher number of FDA approvals and continued strong performance from legacy products have been instrumental in boosting gains. Considering all these factors, we believe that it is the right time to bet your money on healthcare mutual funds.
House Tax Bill Fails to Repeal Obamacare
Republicans of the House finally unveiled a detailed tax cut policy under the Tax Cuts and Jobs Act which seeks to reduce corporate taxes and revoke the taxes paid by large businesses. The bill has not been formally signed into law but a detailed framework has been presented.
The framework did not revoke the individual mandate specified under Obamacare. This mandate requires all citizens of the United States to necessarily own health insurance. However, the bill seeks to abolish any deduction for medical expenses and the drug research tax credit.
Further, members of the GOP argue that the move to repeal tax credit on drug research would help accumulate as much as $54 billion from 2018 through 2027. Meanwhile, the bill increases the standard deduction and slashes the interest rate. Interestingly, most of the counties within the United States will have access to free healthcare plans. This move helps people from the lower income bracket to secure access to health insurance.
Tax Reforms to Boost Healthcare Stocks
In an executive order in October, Trump had aimed at scrapping a key component of Obamacare. However, the uncertainty was reduced to some extent as news of the two political parties coming to a bipartisan deal started doing rounds. This in turn led to a rally in healthcare stocks.
