Within a week, former Vice President Joe Biden has become the frontrunner in the Democratic primary. Given his strong performance with African American and working-class white voters on Super Tuesday, it's likely that he will have an insurmountable lead over Senator Bernie Sanders by March 17. Biden's surge started with his strong showing in South Carolina and then the rest of the moderates dropped out and endorsed his candidacy.
Super Tuesday was a triumph for him especially since he won states in which he was lagging in the polls, spent no money and didn't campaign. Basically, the Democrats didn't repeat the mistakes that the establishment Republicans made during 2016 when Senator Ted Cruz, Senator Marco Rubio, and Governor John Kasich kept their campaigns going and effectively split the anti-Trump vote.
While the primary isn't technically over, Biden's strong showing with key demographics and Sanders' underwhelming turnout figures in his demographics undermines Sanders' basic argument that his candidacy would bring tons of youth and nonvoters to the polls. The reality is that there is a surge in educated, suburban voters turning out for Biden who may not be as amenable to Sanders. The surge mirrors what happened in the 2018 midterms and points to a durable realignment in the electorate.
Effect on Healthcare Stocks
The biggest winner from these developments were healthcare stocks. The Health Care Select SPDR ETF (NYSE: XLV) gained 7% the past week. Compare this to the S&P 500's (NYSE: SPY) 1% gain. Biden's election removes the tail risk of Sanders being elected and implementing his proposals which include Medicare for All, ending private insurance, and other types of cost controls.
Given recent events, Biden's strong standing in head to head polls, and the impressive surge in suburban voters, Biden looks to be a strong favorite against President Donald Trump. In terms of policies, a Biden presidency would likely be a continuation of President Barack Obama's policies. While there were initial fears that Obamacare would wreck the healthcare industry, this sector ended up being one of the best performers during his tenure.
Before Obamacare, there were 44 million Americans without insurance. The current figure is 27 million. It's likely that Biden will focus on reducing this number further which means more customers and revenues for the industry.
While this is a catalyst for the group, the long-term fundamentals are favorable for the industry as well due to the aging population in the U.S. Additionally, the recent coronavirus outbreak has highlighted how fragile the system is to such extraneous shocks. Given low interest rates, it's likely that significant investment could be made into the "healthcare infrastructure" to make the system more resilient to such events.