Eli Lilly (LLY) and Novo Nordisk (NVO) dominate the market for weight loss drugs. The monopoly has proven incredibly profitable for both companies. Consider that in the last quarter, LLY reported that $8.58 billion of its $15.56 billion in total revenue came from its two GLP-1 weight loss drugs Mounjaro and Zepbound. Even a greater percentage of NOVO’s sales and earnings comes from their weight loss drugs. Pfizer has attempted to compete with LLY and NOVO, but thus far has been unsuccessful. To wit, Pfizer scrapped research on its experimental pill Danuglipron due to serious concerns regarding liver damage. Pfizer has changed its tack and is now offering to pay up to $7.3 billion for Metsera (MRK).

Unlike LLY and NOVO, MTSR doesn’t have an approved weight loss drug on the market. However, it does have four clinical-stage programs, of which one is now in the FDA’s Phase 2 of development. It is expected that some of these drugs could start producing revenue as early as 2028 or 2029. Per the WSJ:

Analysts at Leerink Partners said they think Metsera’s differentiated obesity drug candidates could generate more than $5 billion in combined peak sales.

Pfizer needs to fortify its future revenues. Per the WSJ, they face a “steep patent cliff,” with numerous drugs, including its pneumonia vaccine Prevenar 13, set to lose patent protection in 2028. The graph below shows that since May 2022, when LLY’s Mounjaro was approved for sale by the FDA, its stock price has increased by approximately 150%. Over the same period, Pfizer shares have been cut in half. Is it any wonder that Pfizer is desperate to fatten its profits with weight loss drugs?

What To Watch Today

Earnings
 

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Economy
 

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Market Trading Update

Yesterday, we discussed how market participants continue to find new excuses to buy stocks despite current valuation levels. Whether it is rate cut expectations or an economic resurgence, the hope is that the market can grow into its optimistic outlook. Speaking of speculation, Gunjan Banerji wrote a fascinating article in the WSJ yesterday morning about a new instrument for retail speculators. This new speculation tool is specifically for cryptocurrency. To wit:

“The market for cryptocurrencies is known for boom-and-bust trades. It’s about to get even wilder. Traders seeking rapid returns have made a speculative bitcoin play one of the most popular crypto bets globally. So-called perpetual futures potentially offer returns of 10 or 20 times an initial investment–or huge losses.

Known as perps, the contracts give traders access to extreme leverage and have exploded in popularity during a rally that has sent bitcoin prices up more than 70% over the past year. Though popular in other parts of the world, perps were largely unavailable until recently to U.S. traders on regulated venues. Their emergence is a sign that financial markets, which have steadily grown riskier since 2020, will likely keep growing more speculative. Although U.S. stock indexes are at records and valuations are stretched, many traders are enthusiastic about making ever-bigger bets. Perps made up around 68% of bitcoin trading volume in 2025, according to Adam Morgan McCarthy, head of research at analytics firm Kaiko.“

Here is how they work, according to the WSJ:

“The instruments are derivatives, but unlike traditional contracts lack expiration dates or so-called “strike prices,” at which contracts can be exercised. Gains or losses are based on bitcoin’s moves; the trades are akin to options that are automatically rolled further and further out in time. For example, a trader might open a bullish position in perps with $500. She gets 10 times leverage, which means she has exposure to $5,000 worth of bitcoin. If bitcoin prices jump by 10%, her initial investment doubles. She just made $500. Of course, a 10% price drop means she is wiped out.

When perps are trading at higher levels than the spot price, those holding long positions regularly pay something called a funding rate to the counterparty on the derivative every eight hours. This is designed to keep the prices of futures contracts and underlying bitcoin prices linked. Those who are short the contracts can receive the funding rate. The bets can be big moneymakers for those hosting the trades.“

Unsurprisingly, while retail speculators bet on price moves, Wall Street collects the money. As is always the case, the “house always wins in the end.”

Will traders make money on those “perps?” Maybe. However, given its correlation to the stock market, bitcoin’s “risk-on“ nature may be at risk if a market correction ensues. More notably, bitcoin may be providing a warning for those chasing the markets as well, as downturns in bitcoin have tended to precede rockier times in the general market.
 

Another Recession Warning Is Flashing Red

It appears that over the past few years, many reliable recession warnings have proven to be inaccurate. For instance, the yield curve inverted and then un-inverted, which has always resulted in a recession. Leading Economic Indicators (LEI) have been declining for four years and sit below 2020 levels. The ISM manufacturing index has been signaling a recession for four years to no avail. Today, we present yet another. Whether it’s a false warning or something that warrants attention, we will find out in time.

The three-month percentage change in aggregate hours worked in the private sector is down 0.2% over the past three months. As is highlighted with red circles, all but two of the eleven prior instances with a negative reading have been accompanied by a recession. The two false warnings were in 1985 and 1995. Is this another false warning like so many we see? Could it be due to increased productivity due to AI? Or is this a recession warning we need to take seriously?
 

Accommodative Or Restrictive: Decoding The Fed’s Latest Move

Some Wall Street pundits believe that the recent Fed rate cut makes its policy too accommodative, and they also argue that the Fed is creating a “Goldilocks” scenario for the stock market. To wit, we recently saw the following comment and graph on X, which suggests we are in the “Goldilocks zone.”  

“Market is currently pricing in a Fed that will be too loose into an economy that really doesn’t need this pace of accommodation. This is the Goldilocks zone for risk assets. That’s the top right quadrant.”

Instead of guessing where the Fed’s policy falls on the restrictive to accommodative spectrum, as the graph above does, we thought it would be more useful to use actual data to create a similar graph.

Doing so will better inform us about whether the Fed’s current policy stance is appropriate. Importantly, from an investment perspective, this will help us determine if Goldilocks has arrived. Or, if policy is indeed restrictive, might the Fed pose a problem for stocks down the road?

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