Robert F. Kennedy Jr.‘s appointment as U.S. Secretary of Health and Human Services has sparked concerns over funding for the National Institutes of Health. Analysts warn that potential cuts to this funding could lead to increased “uncertainty” in the healthcare sector, potentially impacting healthcare stocks.
What Happened: The NIH grants are “very important” sources of funding for a lot of labs out there, said Kyle Mikson, managing director and senior research analyst in conversation with Michael Graham, senior managing director and head of U.S. equity research internet analyst at Canaccord Genuity.
Talking about RFK Jr.’s appointment Mikson said “He’s got some opposition to vaccines, to infectious disease research.” Highlighting the possible funding cuts along with caps on grants, Mikson added, "Things like that are causing uncertainty, causing, you know, stocks to decline."
Kennedy, known for his vaccine skepticism and conspiracy theories, has extended his influence globally, undermining health initiatives like vaccination and AIDS prevention, The New York Times reports. Through his nonprofit, Children's Health Defense, Kennedy has disrupted public health efforts in countries like Uganda and South Africa. He has also questioned the World Health Organization and its programs for fueling global health conspiracies.
The Donald Trump-led administration is trying to set caps at around 15% and 10% for some labs which is delayed due to broad opposition by many states. While this is detrimental to some NIH-funded labs, others have stated that they can function without indirect cost funding or support.
While, NIH awarded about $2.5 billion in grants in the first six weeks of 2024, this year, that number has plummeted to $1.4 billion.
Why It Matters: While there isn't going to be a blanket impact of these caps on all healthcare firms, Mikson explains that companies that are academically focused are more likely to be impacted as compared to the ones with a mixed revenue base.
However, when considering investment opportunities, especially for growth-oriented companies with research-driven businesses, the impact is particularly important, Mikson explained.
According to the 13F SEC filings during the fourth quarter, healthcare sectors experienced a sharp decline in investments, with allocations dropping by 1.4%. Adam Turnquist, the chief technical strategist at LPL Financial said that "The nomination of the so-called anti-vaccine Health Secretary, Robert F. Kennedy, Jr., and the potential for reduced Affordable Care Act subsidies," was also a potential trigger.
Kennedy’s appointment comes as healthcare costs rise and bird flu spreads, raising pandemic concerns. A longtime vaccine skeptic, his stance could impact pharmaceutical companies like Pfizer Inc. PFE and Moderna Inc. MRNA, especially as he has questioned the safety and efficacy of bird flu vaccines.
Here is a list of healthcare sector-linked exchange-traded funds, that investors could consider while trying to gain exposure to the sector.
| ETF Name | YTD Performance | One Year Performance |
| Health Care Select Sector SPDR Fund XLV | 6.41% | -0.46% |
| Vanguard Health Care ETF VHT VHT | 5.79% | -0.19% |
| iShares Biotechnology ETF IBB | 4.51% | -0.18% |
| SPDR S&P Biotech ETF XBI | 0.19% | -5.79% |
| iShares U.S. Medical Devices ETF IHI | 10.36% | 12.22% |
| iShares Global Healthcare ETF IXJ | 6.67% | -0.57% |
| iShares U.S. Healthcare ETF IYH | 5.52% | -0.26% |
| Fidelity MSCI Health Care Index ETF FHLC | 5.90% | -0.27% |
| ARK Genomic Revolution ETF ARKG | 10.14% | -14.26% |
| First Trust NYSE Arca Biotechnology Index Fund FBT | 6.72% | 16.97% |
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