The executive order on Obamacare by President Donald Trump on Friday reaffirms his intention to abolish the law, but US fund managers expect little impact on the law during its initial stages. Trump’ order directed the Health and Human Services secretary and other agency heads to reduce the burden of Obamacare on healthcare providers, insurers, states, and largely Americans.
Trump’s executive order is expected to grant more waivers for health care programs, provide more flexibility to the Health Secretary to loosen the guidance issued to conduct the regulations of Obamacare, grant exemptions, and delay the implementation of Obamacare provisions, which imposed fiscal pressure on individuals, companies and states without providing any details.
What American Fund Managers Expect
The biggest hurdle in repealing and replacing the Affordable Care Act is the slew of regulations controlling the law. Trump’s executive order falls flat before such regulations, thus making it difficult for the new administration to repeal certain core aspects of the law. Portfolio managers from Gamco, Fidelity, Thornburg and other giants feel that the broad outlines of Obamacare is likely to remain intact despite the order. Fund managers are also of the belief that Trumpcare will not be dramatically different from Obamacare. They consider Trump’s executive order vague and filled with uncertain impacts on Obamacare.
Impact on Healthcare Stocks
As a result, they are considering investments in hospitals, bio-tech firms and health insurance companies, which have been hit unfairly by political uncertainty. Healthcare stocks plummeted after Trump’s election on November 8, and have underperformed since then. However, since the beginning of January, healthcare stocks such as HCA Holdings Inc outperformed after the Republican government proposed to repeal and replace Obamacare. HCA shares rose by 7.9% since the beginning of the year, as compared with a 1.2% rise in the S&P 500, and are trading higher now than the Election Day.
Nonetheless, portfolio managers do not expect a “whole lot of disruption”. Many fund managers decided to keep their holdings intact because they don’t expect many changes coming from the executive order. Biotech and medical device industries continue to operate in a bullish market.
However, Eddie Yoon, fund manager of Fidelity Select Health Care fund, Boston, expects an extension of a tax suspension on sales from medical devices. They feel that the new administration is more concerned about immigration and tax reforms than healthcare. Tax cuts on overseas profits of bio tech companies would be beneficial because it would promote mergers and acquisitions by pharmaceutical companies.