Healthcare was one of the best performing sectors in January and continues to look strong in both long term and short term momentum. Among the many healthcare ETFs, investors should consider iShares Dow Jones U.S. Healthcare Sector Index Fund (IYH) as their best option, with iShares Dow Jones U.S. Medical Devices (IHI) second.

In the month of January, IYH outperformed the market, losing only 0.7% while the S&P 500 declined by 3.6%. The second best performing healthcare ETF was IHI, which only lost about 1.3% on the month. Interestingly, IHI and IYH are U.S. focused healthcare ETFs and global healthcare ETFs did not fare as well in January as the domestics.

Highlighting the increasingly fluid political landscape in Washington, a relatively unknown Republican state senator claimed the Massachusetts Senate seat previously held by Ted Kennedy on Tuesday. Scott Brown’s upset victory over Martha Coakley, the state’s attorney general who had been a heavy favorite just one month ago, not only humbled Democrats already expecting a handful of difficult races in 2010 but also imperiled the health care overhaul that seemed to be on the verge of becoming law.

Brown’s election breaks the 60 seat filibuster-proof majority held by Democrats in the Senate, as the Republican will replace Paul Kirk, a Democrat appointed to the seat until a special election could be completed. Once it became clear that Brown would pull off the upset, speculation turned to the health care issue. Many opposed to the legislation worried that Democrats would attempt to delay Brown’s swearing in, pushing through the bill while Kirk still held his seat. But that outcome seemed increasingly unlikely late Tuesday. Virginia Senator James Webb, a supporter of the health care legislation, called for the Senate to take no votes until Brown could take his seat in Congress.