Health care investor sentiment right now is grim. It's funereal. I spent time this week canvassing professional health care investor sources, asking them to rate their mood on a 1 to 10 scale.
What I got back in response was a ton of 1s and 2s with a sprinkling of 3s. This was before Thursday's drug stock meltdown. The Nasdaq Biotechnology Index fell almost 3%, sending it to within a couple of percentage points of the June low.
The fatigue and uncertainty of the presidential election, the backlash against drug pricing, slowing and even negative sales growth, and a cloudy outlook for 2017 are all contributing to the worst overall performance for biotech and pharma stocks in years.
The Nasdaq Biotechnology Index has declined 18% since Sept. 22, the most recent high. For the year, the index has dropped 27%. The low point for the year, in June, saw the index down 29%, so we're getting close again. Two popular exchange-traded funds, the iShares Nasdaq Biotechnology (IBB) and the SPDR S&P Biotech (XBI) are down 27% and 24%, respectively.
A fund manager with a lot of years of health care investing under his belt told me that October was his worst month of performance ever. Previously, January 2016 was his worst month.
"The sky is literally falling," said another investor. He rated his mood a 1.
Another investor source (he runs a very large health care fund) fled his office this week to escape the carnage. "I would be at a 1 if I were in the office, but after this morning's earning calls, I took a mental health day to clean up my roof in the beautiful sunshine, so I'm at a 6."