Biotechs are setting up for an incredible 2024

  Biotechs Are Setting Up for an Incredible 2024 Dear reader, Heading into Wednesday’s Federal Reserve meeting, the odds of the central bank starting to cut interest rates in September were above 90%. After the meeting, those odds jumped to 100%. That doesn’t surprise me. However, the fact that the odds also suggest there’s now a 29.5% chance of a 50-basis-point rate cut in September is crazy. I don’t believe there’s any way that the Fed waits this long to begin cutting rates and then starts with such a bold move. Instead, I think it’s a near certainty that we see a 25-basis-point cut. One month ago, the odds of a rate cut in September were only 65.5%. But slowing inflation and a stronger economy has changed market expectations – and the likely path of the Fed. The 10-year Treasury yield has fallen from 4.48% to 3.94% over the past month – its lowest level since February. This is a significant movement for stocks, especially small caps and sectors that often rely on borrowing money. As interest rates fall, borrowing costs come down and can lead to higher bottom-line profits. You can see this action taking place in the chart below. The iShares Core S&P Small-Cap ETF (IJR) has rallied 9% over the past month versus a 5% decline in the Vanguard Mega Cap Growth Index Fund (MGK). Biotechs in particular have outperformed recently. The ARK Genomic Revolution ETF (ARKG) is up 12% over the past month and is one more bullish week away from a four-month high. Longtime readers know that I have been interested in this space for years. It has a lot of upside potential in the years ahead as the Fed begins its rate-lowering cycle. In fact, when I laid out my outlook for 2024 and beyond, I highlighted the biotech sector as a top investment. The broad SPDR S&P Biotech ETF (XBI) is up 11% so far this year – slightly lagging the S&P 500’s 15% gain. But I believe biotech stocks are setting up to have their best year since 2020. The Biotech ETF lost 20% in 2021 and 26% in 2022. It was saved from three consecutive years of losses by a late rally that allowed it to finish 2023 up 7%. So it’s no surprise that mega caps have crushed biotechs over the past five years. But it’s finally time for the narrative to flip… Lower interest rates combined with several years of underperformance has the biotech sector poised to become a leader in the coming years. And long-term investors should be prepared. Now, this space is inherently riskier than others in the market. So I always recommend taking a basket approach when investing in biotechs. That means you shouldn’t put all your eggs in one basket. Instead, spread your total investable dollars across multiple companies. This maximizing your upside potential and limits your downside risk. Or you can let me do the heavy lifting for you. As soon as the time is right to start adding exposure to this industry, you can bet my subscribers will be the first to know. Here’s to the future, [McCall's Signature] Matt McCall Editor, Market Insights Check Out My Latest Podcast The summer months typically lack big headlines in the stock market. But that hasn’t been the case this year. On [this episode of the SteadyTrade Podcast]( Tim Bohen and I dissect some of the hottest stories of the last week – including those about Bitcoin (BTC-USD) and second-quarter earnings – and what they mean for your portfolio. Then, have you experienced the “Zyn Craze” that has been taking place? We discuss the stock that has been the biggest winner as this trend has boomed. And finally, we begin sharing the names of six stocks at the top of our watch lists. All are small caps that will benefit from our thesis that smaller stocks will outperform their larger counterparts in the coming months. [Check out the podcast to learn more.](   © 2024 Centurion Publishing 13809 Research Blvd, Suite 500, Austin, TX 78750   *Results are not typical. 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