When a Trend is Not What It Seems
Traditional knowledge states that the healthcare industry is one of the most consistent long term growth sectors out there. Everybody needs healthcare, and as the population grows, this is one sector where growth is the most likely to occur. It might not get the same headlines that the tech industry gets as Apple, Google, and Microsoft keep making page one news, but the healthcare sector is setup for sure and steady growth over the coming decades. It’s one area where long term investments are seen to have a high confidence rating.
Not all is great in the healthcare industry, though. Look at what is currently happening with Aetna right now. Aetna is the third largest health insurance company in the United States, but they are seeing some major problems when it comes to profitability. They have been involved in the healthcare exchanges established by the Affordable Care Act in 15 states, but have just recently announced that they will be cutting back on this over the next year to only four states. Their reasoning: they are projecting that the Obamacare exchanges will result in a loss for them.
Aetna is not the only major insurer reporting issues here. UnitedHealth Group has stated that they will only remain on three or fewer exchanges, Humana is cutting involvement to only 11 exchanges, and although they are reporting losses on all exchanges, Cigna has decided to try and expand their coverage to more states to see if this can reverse their losses. In other words, the industry is hurting big time right now. And this is in spite of the fact that health insurance is legally required under current U.S. law. Everyone needs it, but companies are losing money providing it.
This is reminiscent of what has occurred in the airline industry over the years. When commercial flight first became feasible, you would think that if someone had invested money in the sector, they would now be extremely rich. That’s the opposite of what would have occurred, though. The airline industry, although it has grown considerably since the Wright Brothers first took to the skies so many years ago, has been a consistent loser over the years. If you had invested in commercial flight decades ago, you would be completely broke today. The industry, although it has grown in a visible, has actually seen net losses over the decades. Despite its necessity and popularity, this is a sector that has seen far more bad on an economic front than it has seen of good. Going short, like what is so popular with binary options traders when an asset is hurting, would have been the best way to approach airlines and air travel from a short term trading perspective. There’s no clear sign that this is the case with the healthcare industry, but it is definitely something to keep in mind as you set up both your short term trades and your long term investments. There’s room for growth here for sure, but no easy way to determine how or where it will happen.
It acts as a valuable lesson to binary options traders. Even though an asset has a great forward projection, short term trends will vary despite all of this. The short term trend for oil, for example, can be downward even though experts predict that it will be more expensive in 12 months. This is why it’s so important to do your research thoroughly and apply it to the expiries that you will be trading. A one-week trend can even be different from a five minute trend. Trade with the applicable trend, and not the long term analysis.Categories: Trends