NFTRH 474 Excerpt on Medical Devices

I’ve been posting a bit publicly about the sector so I may as well put the below excerpt up as well. Aside from the usual charts it was really just some dredging and speculating about the tax dynamics swirling around the sector (we also expanded a bit on the Biotech sector) within the US Stock Market segment, which covers a ton of sectors.

First however, we noted in NFTRH 474 that the IHI/SPY ratio was looking more constructive of late and through the first two days of this week, that is even more the case.

ihi/spy ratio

US Stock Market – Medical Device/Equipment Sector

Medical Device & Equipment (IHI) remains relatively firm above lateral support and the SMA 50. This is technically fine at this time. Still holding MDT, MZOR and CRY.

ihi

Everything here is intact as even BSX has so far held a higher low to its uptrend. It’s below the SMA 50 however, after it and competitor MDT got hit on negative Stent studies presented in the media.

ihi

Let’s talk a bit more about Medical Devices. We’ve previously noted that the 21st Century Cures Act would be beneficial to device companies seeking FDA clearance. That is a positive for the sector.

We also noted that a Republican congress might permanently repeal the Medical Device Excise Tax (MDET) as part of its overhaul of the ACA. Currently, from irs.gov

A 2 year moratorium on the tax is due to expire next month.

irs

An August report from KPMG noted that the Problem Solvers Caucus (a group of 40 Democrats and Republicans working together) released a plan last summer…

kpmg

I am unable to find any direct reference to the MDET in the proposed Republican tax plan. Will it have to wait until they get the Healthcare situation untangled, if they ever do? I welcome any input you may happen to have in this area.

But as of now at face value, it appears the moratorium is to be lifted at the end of 2017 and the tax will be reinstated for 2018. That may be a key fundamental consideration or it may not. You’d think that a reasonable stock market would already be discounting the possibilities. You’d think. But I wanted to dredge it up and throw it in here regardless, for what it’s worth. Forewarned being forearmed and all.

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