Two ETFs to Avoid the Health Care Fallout

NEW YORK (TheStreet) -- First Trust NYSE Bio-technology (FBT) and SPDR KBW Regional Banking ETF (KRE) offer two ways to avoid political fallout from the passage of the health care reform bill.

As I have discussed in the past, ETF investors can avoid the political mayhem in the sectors that the bill is directed toward by choosing health care ETFs that focus on bio-tech companies, such as FBT, and financial ETFs that include regional banks such KRE. Year to date, FBT has risen 29.4% while KRE has gone up by 18.7%.

These sub-sectors of health care and financials fall outside the scope of President Obama's reform agenda and will likely see continued upward momentum regardless of the action in Washington.

Late Sunday, the House approved the health care reform bill, clearing the way for an overhaul of the sector after a long, controversial political battle.

If the lobbying efforts of the pharmaceuticals are a good indicator, iShares Dow Jones U.S. Pharmaceuticals (IHE) should benefit. These companies are expected to benefit from the increase demand for pharmaceuticals from the addition of Americans to insurance rolls.

Similarly, biotechnology, which wasn't a target of the legislation, is likely to benefit from higher levels of spending.

The passage of the bill also affects ETFs that would benefit or suffer from legislation that Obama plans on fighting for later this year.

The protests against the proposed health care bill in Washington this weekend show that Republicans have the opportunity to use the bill's passage as a way to foster animosity against the Democrats in this year's mid-term election. If the Republicans can claim more seats in the Senate, they will be in a better position to check the president's plans.

In the special election in Massachusetts in January, a mostly Democratic state voted Republican Scott Brown into the Senate, knowing full well that he would jeopardize health care reform. As a result of the Massachusetts election and the passage of the health care overhaul, it looks likely that November's election will not go well for the Democrats, which faces internal strife from those within who are disenchanted with Obama's reform efforts.

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