I’ve been looking at $XLV going into the midterms, and what interests me most is the uncertainty around the setup. Historically, buying XLV around the end of September in midterm years and holding through the end of November has worked pretty well 2002: +9.1% 2006: +0.2% 2010: -0.8% 2014: +9.0% 2018: +0.8% 2022: +14.8% That’s 5 out of 6 positive periods, with an average return of about +5.5%. What makes the setup interesting to me is that healthcare tends to be a defensive area when there’s a lot of uncertainty, and midterms usually bring plenty of that. You also have questions around regulation, Medicare, drug pricing and healthcare policy hanging over the sector. Once the election is over, some of that uncertainty gets removed, and historically the broader market has often responded well after midterms. So my thinking is pretty simple, uncertainty now could create the setup, and more clarity after the election could be the catalyst. The sample size is obviously small, so I’m not treating the 83% hit rate like a guarantee. I just think it’s an interesting historical pattern to have in mind given where we are right now.
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Bought
XLV@$170.57
New Holding
0.00→0.90%
of total portfolio
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