Pharmaceuticals Miss the Party

As the U.S. equity markets turn in a second month of gains, the pharmaceuticals sector has been left behind.

(click to expand)

After bottoming in early March, the market has turned in consecutive weeks of postive results with the SPDR S&P 500 ETF (SPY) up 29% from the low.  That compares to only a 11% gain for the SPDR S&P Pharmaceuticals ETF (XPH) over the same time period.

XPH is an equal weighted fund of 22 drug companies.  Major holdings include Johnson & JohnsonPfizer, Abbott LabsWyeth and Merck.

A strong dollar and empty development pipelines have dragged on the industry’s prospects.  However, the biggest uncertainty lies with the Obama administration’s ambitious health care plans.  After watching the government effectively nationalize the large banks and the automotive industry, investors are nervous that pharmaceuticals may be next in line for government takeover.

Other ETFs that provide exposure to pharmaceuticals include the Dow Jones Pharamceuticals Index Fund (IHE) and the PowerShares Dynamic Pharmaceuticals Portfolio (IBB).

For more, see the ETF Directory for a complete listing of Industry ETFs.