Wall Street Is Betting Obamacare Will Succeed

The Republicans are still talking about repealing the Affordable Care Act (Obamacare), and they are still telling Americans that Obamacare can't succeed -- that it is guaranteed to fail. But while some teabaggers are believing those GOP claims, Wall Street is not (which is rather strange since the only constituency the GOP cares about are the financial institutions and corporations on Wall Street). This is clearly shown in the chart above (from Bloomberg Businessweek).

Online broker Motif Investing decided to test the market on Obamacare. They put together two packages of investments -- one that would benefit from the success of Obamacare, and another that would benefit from the repeal or failure of Obamacare. Here is how Bloomberg Businessweek describes the opposing funds:

The Obamacare motif is made up of hospitals, generic-drug makers, pharmacy-benefit managers, and companies specializing in electronic medical records, all of which stand to gain from the Affordable Care Act’s emphasis on cost control and its guarantee of payment. “Before the law, 30 percent of hospitals’ revenue was unbilled because you could walk into an ER and not pay,” Walia says. “They’re now paid by the U.S. government.” The Obamacare motif is up 46.9 percent in the past year, doubling the performance of the Standard & Poor’s 500-stock index (up 22.8 percent).

Repeal Obamacare is composed of companies that would benefit from the law’s demise, mainly medical device manufacturers, which the ACA saddles with a 2.3 percent excise tax; assisted-living and home health-care providers, which will suffer from reduced Medicare and Medicaid reimbursement rates; and medical diagnostics equipment and services providers, which may encounter reduced demand as a result of the law’s efforts to curb unnecessary testing. The repeal Obamacare motif has risen just 13.8 percent in the past year.

Note that the investors on Wall Street are investing in the fund that would benefit from Obamacare's success by a large margin. In fact, the fund betting on the success of Obamacare not only outperforms the fund betting against Obamacare, it also outperformed the return of the S&P 500. Obviously, most of the Wall Street investors are not listening to the Republican rhetoric. They know Obamacare can't be repealed for at least two more years, and after seeing the millions that are signing up for insurance under Obamacare, they also know that by then Obamacare will be a fait accompli.

Obamacare is here to stay, and the Republicans know it. They are just sounding off now to play to their teabagger base.