Goldman Sees Health-Care Stock Relief Rally After Super Tuesday

4 Mar    Investing News

(Bloomberg) — One of the most important days of the presidential primaries is likely to be followed by another relief rally in health-care stocks, a Goldman Sachs analyst predicted.

Today is Super Tuesday, when a large number of states hold primary elections, and health-care share prices reflect “too much certainty” that self-described democratic socialist Bernie Sanders will win the Democratic nomination, Goldman analyst Asad Haider cautioned. The field is “once again wide open” as former Vice President Joe Biden’s prospects improve, he told clients in a note.

Wall Street has been of two minds on the Vermont senator winning the Democratic nomination. While some prognosticators fear his Medicare-for-All health-care platform, others have argued that Sanders would be more likely to lose the election to President Donald Trump. Biden has also divided investors on how he may help or hurt stocks.

Trading in options on the $19.6 billion Health Care Select Sector SPDR Fund, known by its ticker XLV, is showing a similar pattern as the trading that preceded previous sector rebounds in late January and early February, according to Goldman strategists. Positioning remains bearish, “with investors even more nervous following yesterday’s rally ahead of Super Tuesday,” they said.

What Super Tuesday Means for Democratic Delegate Math: QuickTake

Total options open interest in XLV shows puts outnumbering calls by a rate of 2.7-to-1, which on the surface is a bearish indicator. The mix in those contracts expiring March 6 is similar. Shares in the fund rallied 4.7% on Monday before sliding again on Tuesday, bringing its 2020 decline to about 6%.

If Sanders fails to win a majority of the delegates in tonight’s primaries, the contest could drag on until July. Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News, is also seeking the Democratic nomination.

Haider correctly forecast a temporary respite for the sector following the Iowa caucus in February.

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