US managers say presidential election will hit healthcare sector

US fund managers say a Republican victory in next week’s US presidential elections will hit the healthcare sector.

The US will go to the polls on 6 November. President Obama and Republican presidential challenger Mitt Romney are currently battling it out in the polls.

Obama has put forward new healthcare legislation that aims to lower healthcare costs for millions of Americans who are not provided for under the current system. The legislation is due to take effect on 1 January.

Romney has vowed to repeal the legislation if elected to office.

Smith & Williamson co-manager of the £80.1m North American fund Robert Royle says healthcare stocks could take a hit if Romney is voted in.

He says: “It is shaping up to be very interesting. A few weeks ago Obama was certain to be re-elected and now it is more a 50:50 race.

“I think the impact on some of the healthcare stocks would be negative if Romney wins, as he will make cuts to Medicare and Medicaid. Whereas Obama wants to spend more, albeit at a lower margin for healthcare companies.”

Royle says equally important is who will take control of the senate.

He says: “It is not just about the presidential election, it is also about who controls the senate.

“If we get a Republican or Democrat clean sweep across the house, the senate and the presidency, it could be quite positive for the US markets. It would mean decisions could be made quicker, rather than having decisions and policies stuck in limbo as we have seen for the last few years.”

Schroders head of US large cap equities Joanna Shatney says: “There are three areas for investors to think about with regards to the 2013 GDP drag from government spending. One is expiration of the Bush tax cuts, two is sequestration cuts which will impact healthcare and defence budgets and three is increased Medicare taxes that come with the implementation of healthcare reform.”