A JPMorgan analyst predicts that the battle to replace the seat of U.S. Supreme Court Justice Ruth Bader Ginsburg could benefit former Vice President Joe Biden and Democrats, and as a result help eventually buoy some health and managed care stocks.
JPMorgan’s Gary Taylor wrote in a note on Monday that he thinks Democratic polling, campaign contributions, and turnout may be particularly invigorated following Ginsburg’s death, Barron’s said.
“Though he thinks a Democratic sweep would send the entire managed care and facilities sector lower, he thinks Centene (CNC) and Molina Healthcare (MOH) could rebound first, if Democrats quickly pass their Health and Economic Recovery Omnibus Emergency Solutions Act. That’s because the $3 trillion stimulus package includes $550 billion for Federal Medical Assistance Percentages and state budget relief,” the financial publication said.
Taylor thinks Humana (HUM) is still the safest stock, in terms of potential impacts from the election, since it would benefit from Biden’s proposal to lower the Medicare eligibility age. He thinks it would sell off less than the group in the case of a Democratic sweep.
“Thus, the election overhang on the [managed care / facilities] sector from Joe Biden’s stated support for a ‘Public Health Insurance Option,’ lowering the Medicare eligibility age and removing the Senate filibuster will likely increase,” Taylor wrote.
Meanwhile, if Republicans in the Senate manage to vote in a conservative Supreme Court justice, the Affordable Care Act could face opposition form a 6-3 conservative majority, Barron’s said.
Thomas Mantione, managing director at UBS Private Wealth Management in Stamford, Connecticut, said the passing of U.S. Supreme Court Justice Ruth Bader Ginsburg also decreases the chances of another fiscal stimulus package to help lift the domestic economy from a deep recession, Reuters explained.
"You've now put yet another negotiating factor into that fiscal stimulus policy response, which makes it even less likely to pass before the November election," Mantione said.
Congress has for weeks remained deadlocked over the size and shape of a fifth coronavirus-response bill, on top of the approximately $3 trillion already enacted into law.
Keith Lerner, chief market strategist for SunTrust Advisory Services, says the Court vacancy doesn’t change the market’s underlying narratives. “The forces that have fueled the rally and lately caused stocks to wobble—including Fed policy and the impact of Big Tech on the S&P 500—remain intact. But Lerner also sees more potential for volatility to persist after election day,” Barron’s explained.
“This adds more fuel to a very high pressure, high-emotion election, but it’s not a game changer by itself for market impact,” he says.
One Wall Street strategist contacted by Barron’s said that it was too soon to say how the markets would react to the upheaval over the court vacancy.
“I hosted a poker game last night and you could drive a truck through the debate—whether it would be better for Biden or Trump,” the strategist said. “Markets were volatile and consolidating over the last two weeks. The elections increase uncertainty and this is another issue that the market has to grapple with.”
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