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Healthcare Stocks Face Policy Split After Midterm

BY | ETF Database
8:50 am ET 11/05/26 | 9 VIEWS
Democrats won control of both the House and Senate in Tuesday’s midterm elections, according to The Associated Press. The results set up a divided government for the final two years of President Donald Trump’s term. This could have repercussions when it comes to healthcare stocks.Key Takeaways: Democrats will hold majorities in both the House and Senate, creating a divided government in Washington. Eli Lilly and UnitedHealth lead TMED’s holdings, giving the fund exposure to both drugmakers and insurers. Life science tools makers could gain from higher NIH funding, depending on how the money is spent. As of Wednesday afternoon, Democrats held at least 54 Senate seats, and their House majority grew well past the 218 needed, the AP reported. Some races, however, remain too early to call. Healthcare is already on the agenda. House Democrats plan to move quickly to reverse Republican-passed cuts to the Affordable Care Act and Medicaid, the AP reported. For investors, though, the broad market reaction may be limited. “Markets have largely anticipated this outcome for much of 2026, suggesting the immediate impact could be muted,” Tim Murray, capital markets strategist at T. Rowe Price, wrote in a post-midterm outlook. See more: Fed Hiking Cycle May Run Longer Than Markets Expect Instead, more meaningful implications could emerge at the sector level, Murray wrote. In healthcare, Democratic efforts on Medicaid could help hospitals and insurers, while drug prices could draw bipartisan attention. Gil Fortgang, an associate analyst covering Washington and regulatory research at T. Rowe Price, expects Democrats to prioritize moderating some planned Medicaid cuts. Success could help hospitals and health insurers exposed to the program. Lowering drug prices could also become a bipartisan issue in talks over the debt ceiling, or the cap on federal borrowing, Fortgang wrote. However, the Trump administration appears to prefer making deals with companies over legislated price controls.Midterm Policy Themes Inside a Healthcare ETFBoth groups sit near the top of the T. Rowe Price Health Care ETF (TMED ). Eli Lilly and Co. (LLY) was the actively managed fund’s largest holding at 6.15% as of Nov. 4, according to T. Rowe Price. Health insurer UnitedHealth Group Inc. (UNH) followed at 5.16%. Life science tools makers also rank among its top 10 holdings, the firm’s data show. Thermo Fisher Scientific Inc. (TMO) makes up 3.4% of the fund, while Agilent Technologies Inc. (A) accounts for 3.01%. A divided government could also boost the budget for the National Institutes of Health, which funds medical research, Fortgang wrote. Still, whether tools companies benefit depends on how that money is spent. TMED launched in June 2025 and had $34.5 million in net assets as of Nov. 3, according to T. Rowe Price. Its expense ratio is 0.44%. The ETF returned 27.7% over the year through Sept. 30, the firm reported. Its benchmark, the S&P Health Care Select Sector Index, gained 23.02%. The debt ceiling talks Fortgang flagged may still be a while off. The $41.1 trillion limit is expected to be reached around mid-2027, wrote Blerina Uruçi, T. Rowe Price’s chief U.S. economist. The Treasury could then run out of cash and turn to emergency accounting measures in late 2027 or early 2028. For more news, information, and analysis, visit our Active ETF Content Hub.

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