Health Care Stocks and Tuesday's Election

As Tuesday's sector performance highlighted, the prospects of a Scott Brown victory in the Massachusetts US Senate race put the passage of Health Care reform in serious doubt.  On the day, Health Care was the top performing sector with a gain of over 2%.  However, long before Scott Brown pulled ahead in the polls, the Health Care sector had already bottomed in terms of relative strength vs. the S&P 500.  As shown in the chart below, Health Care's relative strength bottomed back in mid-October when it became clear that any legislation that actually passed would be severely watered down.  For investors who were long the Health Care sector, the recent reversal in the polls just made an already good situation even better.

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