The health-care sector finds itself again at a political crossroads.
Ahead of the U.S. election, President Donald Trump pledged to protect preexisting conditions by way of executive order even as the Republican Party tries to dismantle the Affordable Care Act through the courts.
Democratic nominee Joe Biden, meanwhile, is looking to expand Medicaid and Medicare while protecting the ACA.
The results of the election could have a major impact on different parts of the health-care sector, the second-largest weighting in the S&P 500, said Chantico Global CEO Gina Sanchez.
Sanchez has analyzed the winners in two scenarios: a Trump victory and the GOP retaining control of the Senate; or a Biden victory and a Democratic sweep.
Presuming a Republican win, "the GOP is determined to weaken the Affordable Care Act. The winners out of that are going to be the drugmakers and the insurers," Sanchez told CNBC's "Trading Nation" on Friday. "However, on the other side of the spectrum … you see a Biden determination to increase equipment manufacturing, to increase testing and tracing, and sort of all of the elements that go with Covid, including novel therapies, and that would hugely benefit biotech. It would also benefit the equipment makers."
Carving up the space using Sanchez's argument, a Trump and Republican win might benefit the IHE pharmaceuticals ETF and IHF health-care providers ETF. A Biden and Democratic win could benefit the IBB biotech ETF and IHI medical devices ETF.
Craig Johnson, chief market technician at Piper Sandler, said that the IHI ETF should perform well heading into the election.
"These stocks are the ones that are really outperforming," Johnson said during the same "Trading Nation" segment. "This index, it's at the upper end of a nice upward trending price channel. It looks like to us that we're just testing the lower end of this and we're going to continue to see great relative outperformance for the IHI."
The IHI ETF, which includes stocks such as Abbott Laboratories and Thermo Fisher, has risen 10% this year, while the broader XLV health-care ETF has gained just 1%.
As for specific stocks in that group that could outperform, Johnson singles out Steris and Tandem Diabetes Care. Steris, which specializes in sterilization and surgical equipment, has climbed 12% in 2020. Insulin therapy equipment maker Tandem has risen 82%.
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