Pharmaceuticals

Neutral – Downgrade Alert Sticking to the spirit of covering defensive sectors in this week’s US Equity Sector Insights, today we turn our attention to a major player by market cap weight in the healthcare sector – the S&P pharmaceuticals index. High odds of a Biden victory weigh heavily…

Time Is Nearing To Turn Cautious On Pharma Stocks…

Highlights We reiterate our longstanding overweight on healthcare equities for the next 12 months and possibly beyond. The macro environment, as well as underlying demand factors, will continue to drive the sector’s outperformance. Within healthcare equities, we favor biotechnology and…

Highlights China and India periodically fight each other on their fuzzy Himalayan border with zero market consequences. A major conflict is possible in the current environment – but it would present a buying opportunity. Chinese escalation with India would not have a negative impact on global…

Highlights Duration: Investors should keep portfolio duration close to benchmark, but continue to hold yield curve steepeners (on both the nominal and real yield curves) as well as overweight TIPS positions versus nominal Treasuries. These tactical trades will profit from higher Treasury yields…

Highlights Global shortages of medical equipment – including medicines – are frontloaded until emergency production kicks in. As the crisis abates, political recriminations between the US and China will surge. The US will seek to minimize medical supply exposure to China going forward, a boon…

Pricing Power Blues…

Highlights The odds of universal health care legislation being enacted in the U.S. by 2022 are about 10%-15%. Former Vice President Joe Biden is the most likely Democratic candidate in 2020, but the alternative is most likely a progressive candidate seeking universal health care. Trump is…

Underweight In last month’s downgrade of the S&P pharma index to underweight, we highlighted that headwinds to drug prices would weigh on the sector’s earnings profile.1 This week’s CPI report confirmed this negative pricing view with prescription drugs falling into outright deflation; in…