Speculative Appetite is Sinking in Biotech with Latest Rotation

• XBI down 4.71% to 139.94, ARKG down 5.87% to $90.33.
• Rotation into “reopening” and value trade in sentiment shift.
• Financials, industrials and energy have gained strength with rising rates.

As we have noted in recent posts there is less appetite for speculative trades in biotech. Some of it is related to concerns in the general market about rising Ten Year Treasury yields and supported by weak technicals. And you can see from the bellwether XBI traders have been reducing their positions in smaller cap biotechs.The larger cap biopharmas are also down about 3-5% and they could provide ballast for a healthcare portfolio .  Today the IBB was down 3.58% but the value oriented GSK was up 0.44% and MRK was up 0.62%. Pfizer (PFE) was up 2.63% on some strong buying.

One of the hottest sectors of the biotech market has been genomics and you can see the performance results in the chart below and corresponding article from Investing.com on the ARK management ETFs led by well known growth investor Cathie Wood. The ARK Genomic Revolution Fund (ARKG) was up 178% last year but now down 3.14 % in 2021.

High flier Vir Biotechnology (VIR) gets crushed down 27.64% to $41.78 on no apparent news. 2021 high was near $78!  And biotech is not really impacted by Reddit trades or is it?

Keep in mind that this weakness began off 2021 tops in early February when momentum  was at its peak. So you have to look at your individual holdings to see the impact of the sell-off. For example some of our best  stocks like PACB and TDOC had already corrected yet are down again today. Both had “blow-off ” tops in February. But our GNMK is holding up nicely.

But it looks like any appetite for speculation by traders will be lessened by this second major sell-off in beta names over past two weeks. Fundamental have not mattered but some valuations are crazy. Creeping up rates hurt both tech and biotech. As the dust settles you may need a portfolio re-balancing.