Trump Picks RFK for HHS
Though it’s been less than a month since the U.S. presidential election, Wall Street investors are still re-positioning and shifting their positions to take advantage of any opportunity the market provides. As I have discussed in previous commentaries, because the U.S. economy and stock market are so massive, the general market indices tend to rise in the long run, regardless of who is in office or their political party. That said, individual industries can be impacted dramatically by new presidents and their cabinets.
One example of a negatively impacted industry is biotech. President-elect Donald Trump announced that he selected controversial former independent presidential candidate Robert F. Kennedy Jr. to run the Department of Health and Human Services.
Biotech: False Breakout
Robert F Kennedy Jr. is known for having strong and divisive opinions on the biotech industry. RFK claims that many large biotech companies are evil and has skepticism about how vaccines are rolled out. With uncertainty about the future, many investors are jumping ship this week.
A popular saying among savvy market technicians is that “from fast moves come false moves.” In other words, if a stock breaks out to the upside and then fails to hold that breakout, the subsequent move to the downside can be vicious. This phenomenon is also referred to as a “bear trap.” Monday, the SPDR S&P Biotech ETF (XBI) broke out of a multi-month base structure. Tuesday, the XBI breakout failed, and the downside has accelerated, with XBI slicing through its 200-day moving average on Friday.
Image Source: TradingView
Below are three market areas to avoid:
Avoid Weight Loss Drug Makers
RFK has criticized Novo Nordisk’s (NVO) blockbuster Ozempic weight loss drug, saying that it focuses on the symptoms of the issue, not the root cause (America’s broken food system).
Avoid Junk Food Restaurant Operators
In a recent interview, Kennedy complained about the bevy of fast-food options on then-candidate Donald Trump’s plane, saying that the food that goes on his plane is “poison.” Trump is a notorious fast-food eater and his favorite restaurant is McDonalds (MCD). Though RFK is unlikely to shut these businesses down, he may look to force changes in fast-food restaurants that will lead to higher prices and lower margins. For example, instead of using seed oils to cook French fries, he may force MCD and others to cook fries in tallow.
Avoid Vaccine Makers
Kennedy’s most controversial views target the vaccine industry. He’s been a vocal critic of the approval process and wrote a book about vaccine advocate Dr. Anthony Fauci, titled, “The Real Anthony Fauci.” As a result, Kennedy will likely make it much more difficult for vaccine makers like Moderna (MRNA) and Pfizer (PFE) to bring vaccines to market.
Bottom Line
With Trump’s appointment of Robert F. Kennedy Jr. as the secretary of Health and Human Services, the biotech industry has more questions than answers. Investors should avoid most biotech stocks until the dust settles.
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Novo Nordisk A/S (NVO) : Free Stock Analysis Report
McDonald's Corporation (MCD) : Free Stock Analysis Report
Moderna, Inc. (MRNA) : Free Stock Analysis Report
SPDR S&P Biotech ETF (XBI): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
