Healthcare After the Midterms: Same Thesis, New Tailwinds | Tema ETFs

Key Takeaways

• The most durable healthcare opportunities are driven by scientific innovation, regardless of who controls Congress.

• An incoming Democratic Congress is likely to support greater healthcare spending and more stable medical research funding.

• As always, healthcare's long-term trajectory is shaped more by scientific advances than by politics.
  

The morning after any election, investors begin sorting out the winners and losers and where opportunities may emerge. While healthcare may not have been the focal point of the midterms, this week’s results could create incremental tailwinds for select areas of the sector. Early market moves suggest as much, with investors already positioning for increased healthcare spending and a more stable environment for medical research.¹ Yet while policy shifts inevitably create tailwinds or headwinds, we believe the most durable opportunities in healthcare remain tied to scientific innovation and better patient outcomes, regardless of which party controls Congress.

A Positive Backdrop for Healthcare

Democrats’ strong midterm showing is broadly constructive for healthcare and reinforces our view from August that healthcare is worth revisiting heading into year-end.

Two implications stand out. First, healthcare spending is likely to remain a priority, supporting patient access and utilization across the system. Second, stability around National Institutes of Health (NIH) funding and vaccine policy should provide a more predictable environment for medical research.

The market's initial reaction after the midterm results reflected those expectations. Companies tied to Medicaid, ACA exchanges, and hospital utilization were among the strongest performers immediately following the midterms, as investors anticipated a more supportive environment for healthcare coverage and spending.¹

Taken together, more healthcare spending and steadier research funding should be positive for several areas of healthcare, particularly medical devices, life sciences tools, and smaller biotechnology companies.

Healthcare Outperformed Heading into the Midterms 
 2026 YTD total return through Nov 3

Source:  YCharts, through Nov 3, 2026. Healthcare returns based on the performance of XLV. Past performance does not guarantee future results.    

Where the Benefits Are Likely to Accrue

Increased healthcare spending matters most where it expands access to care and supports research.

Greater coverage can lead to higher procedure volumes, benefiting medical technology companies and healthcare providers. Meanwhile, a stable NIH funding environment supports the laboratories, tools companies, and emerging biotech firms working to develop the next generation of treatments and technologies.

The market's early reaction also highlights an important divide within healthcare. Businesses whose economics are closely tied to reimbursement and healthcare policy may experience more direct impacts from Washington, while innovation-focused companies remain more dependent on scientific and commercial execution.¹

The Thesis Hasn't Changed

While election outcomes can influence the operating environment, they rarely determine which healthcare innovations ultimately succeed.

New therapies still need to demonstrate efficacy. New technologies still need to improve patient outcomes. New diagnostic platforms still need to earn adoption from physicians, hospitals, and healthcare systems.

This is why our healthcare investment philosophy remains centered on innovation. We believe the most durable opportunities are found in the companies advancing medical devices, diagnostics, life sciences tools, AI-enabled healthcare, and breakthrough therapies.

While some healthcare segments may face renewed policy scrutiny under a Democratic Congress, we remain focused on the areas where long-term outcomes depend less on reimbursement policy and more on whether the underlying science works.

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