Health care was a hot topic at June’s Democratic debates. Several candidates jawboned about “Medicare for All” — government-funded coverage eliminating private insurance.
Many investors are nervous, fearing fallout for health care stocks. But it’s too early to fear (or cheer) this — or any policy proposals that flash-forward this year. Slow down.
Setting aside all political views, if Medicare for All passed, health insurance and hospital stocks likely would suffer. Possibly drug and medical device makers would too, although they are more insulated. Even if legislation doesn’t pass, a heated debate could hurt sentiment, sparking volatility in these stocks. But you shouldn’t think that way.
Here is why:
Nothing changes fast
Health care loomed large in President Obama’s 2008 campaign, but The Affordable Care Act didn’t pass until 2010 and took effect in 2013. Markets barely blinked either time. Health care reform campaign talk and tweets scared investors in 2016, also, but little changed. Any post-2020 changes will be similarly slow.
Stocks don’t really react to this kind of thing even though we commonly think they do. First, markets pre-price widely known information. That means stocks typically reflect all opinions about policy changes long before they take effect — like in 2010. But then, if the new law actually was watered down from initial proposals, it would be a positive surprise, potentially boosting health care stocks. Second, markets move most on probabilities, not possibilities. We’re at least a year away from being able to assess the probability of Medicare for All happening.
For single-payer healthcare to become reality, the Democrats need comfortable margins in both chambers of Congress–plus a president supporting it. Will that happen? I haven’t a clue — no one does, really. Who knows who the Democrats will nominate. It’s way too early.
Then, too, candidates often moderate their views during the general election and while in office. Early big ideas aim to win over the party base in primaries. California Senator Kamala Harris moderated on Medicare for All the very day after her debate. If you believe any Democratic victor would govern as they talked at the debates, there is some great Arizona oceanfront property you may like.
Congress’s post-2020 makeup is similarly unknowable.
If you are worried about stocks: capitalize on the fear and make a fortune
We can use our money to create jobs: I’m a billionaire with a better idea than a wealth tax.
You shouldn’t start weighing any election’s outcome and market impact until the summer before the vote. We need presumptive nominees and relatively defined, state-specific, head-to-head details. We need a clearer sense of how the economy will look. And will Democrats choose an appealing campaign strategy for Midwesterners who swung 2016 to President Trump?
This logic extends to all big policy promises flying around, including tech company breakups, student loan debt cancellation, new taxes or whatever. The chatter can spiral anywhere now, making today’s big issues distant memories in 2021.
So don’t overthink them. While rising election uncertainty may slow U.S. stocks’ gains, the bull market grinds upward despite campaign promises.
Ken Fisher is founder and executive chairman of Fisher Investments, author of 11 books, four of which were New York Times bestsellers, and is No. 200 on the Forbes 400 list of richest Americans. Follow him on Twitter: @KennethLFisher
The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY.