How Will Obama-Care Play Into The Markets And ETFs?

“It is our opinion, along with that of many other market professionals, that this current market is overbought.  An overbought market often searches for a place, or more to the point, a reason to pull back.  This Sunday’s possible vote on Health Care Reform could very well be that catalyst.  This is not an issue of being for or against the legislation, as traders you need to check your political views at the door and trade the market that is in front of you.  It is our opinion that today’s selloff is in part due to Sunday’s vote, and our opinion that the market has found a reason to begin a correction,” Noah Joyce Reports From Examiner.

A win in Sunday nights vote for Obama Care will shake the markets and may provide an opportunity for investors to get into Healthcare ETFs.  “Picking individual drug companies or health care providers can be a tricky business, as outside factors like drug trials, lawsuits and legislation can weigh on results. ETFs are an effective way to mitigate the risk of investing in a single health care company by exposing investors to a basket of securities, rather than a hit-or-miss pick,”  Don Dion Reports From The Street.

This is why fear in the markets should create greed in Healthcare ETFs and as Dion says,“The uncertainty over the future of health care has exacted a toll on the industry. ETFs like iShares Dow Jones US Healthcare Provider (IHF), Pharmaceutical HOLDRs (PPH) and iShares Biotechnology (IBB) all will be affected differently by changes in legislation. One fact remains indisputable, however: America is getting older. As baby boomers reach old age, health care costs are expected to skyrocket. Whether or not new legislation transforms our existing system, costs likely will rise over the long term” 

We put together some details on the 3 ETFs  mentioned including the top companies within the ETFs below:

The investment (IHF) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Select Health Care Providers index. The fund generally invests at least 90% of assets in securities of the index and in depositary receipts representing securities of the index. It may invest the remainder of assets in securities not included in the index but which BGFA believes will help the fund track the index, and in futures contracts, options on futures contracts, options and swaps as well as cash and cash equivalents, including money market funds advised by BGFA. The fund is nondiversified.

The investment (PPH) seeks to diversify your investment in the pharmaceutical industry through a single, exchange-listed instrument representing your undivided beneficial ownership of the underlying securities. The trust holds shares of common stock issued by specified companies that, when initially selected, were involved in the pharmaceutical industry. Except when a reconstitution event, distribution of securities by an underlying issuer or other event occurs, the group of companies will not change. There are currently 21 companies included in the Pharmaceutical HOLDRS.

iShares Nasdaq Biotechnology Index Fund (IBB) is an exchange traded equity index fund launched and managed by Barclays Global Fund Advisors. It invests in the public equity markets of the United States. The fund invests in stocks of companies operating across Healthcare sector. It seeks to replicate the performance of Nasdaq Biotechnology Index. The fund invests in stocks of companies listed on the Nasdaq Biotechnology Index in proportion to their weightage in the index. iShares Nasdaq Biotechnology Index Fund was formed on February 5, 2001 and is domiciled in the United States.