Life sciences stocks viewed positively at TD Cowen despite post-election weakness

TD Cowen projected a positive outlook for Life Science Tools and Diagnostics stocks on Friday despite the sector’s underperformance since President-elect Donald Trump’s successful reelection bid.

Analyst Dan Brennan’s comments coincide with the healthcare sector’s concerns over Trump’s proposal to impose heavy tariffs on goods imported from China and his selection of Robert F. Kennedy Jr., a well-known vaccine skeptic, as his nominee for HHS Secretary.

“Given the uncertainty and exposures, early share price weakness is logical,” Brennan wrote, noting that the large-cap tool sector and diagnostic names have underperformed relative to the S&P 500 and broader health sector since Trump’s election win.

“With President-elect Trump a China hawk touting 60% import tariffs on China, there’s warranted nervousness about whether China will retaliate,” the analyst opined, adding that the sector has about 14% revenue exposure to China, nearly double that of a typical S&P 500 company.

The selection of RFK Jr., an outspoken critic of federal agencies such as the CDC and NIH, “adds more risk,” Brennan wrote, arguing that, however, his confirmation by the Republican-majority Senate is “unlikely.”

“That said, there are positives, and we see room for optimism heading into 2025,” the analyst said. Brennan termed Trump’s focus on lower taxes, economic growth, and M&A bias as positives for the tools sector, and based on historical data, he argued that the impact of the US/China tariffs could be manageable.

Brennan wrote that large caps have low exposure to NIH, a government agency RFK Jr. has already targeted during Trump’s Presidential campaign, and argued that “making substantive change to the organization can be difficult.”

Without ruling out near-term volatility, the analyst said the China and NIH headwinds could be “very manageable” for the sector.