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WEEK AHEAD
September 9-13, 2024
Last week’s market drop has certainly softened our key technical momentum indicators, but remains fully invested, offset by its sound fundamental indicators.
In today's smartphone era, the ability and tendency to check your bank and brokerage balance went from monthly statements to minute-by-minute accounts. Investor behaviors also went from being focused on long-term growth to "real-time" growth, resulting in a lack of tolerance for volatility. While last week's decline in the S&P 500 (-4.22%) and Nasdaq (-5.76%) may have caused a flutter, it's worth remembering that, as of the end of August, both indices had posted impressive year-to-date gains of 19.53% and 18.57%, respectively. Following the Federal Reserve's July decision to hold interest rates steady and Chair Powell's clear August remarks on future policy direction, the economic fundamentals remain largely unchanged. Yet, as we approach September, the specter of the so-called "September Effect" looms. This is when investors often sell assets to raise cash for taxes—a necessary evil, perhaps, but one that can stir the market. Lets remember that investors most valuable asset is time. The longer the horizon, the more room there is for growth; the shorter the time frame, the more pronounced the volatility. In the words of seasoned market sages, it's time in the market—not timing the market—that counts.
The subdued labor report last week, with nonfarm payrolls increasing by only 142k and a U6 Unemployment Rate of 7.9%, is in line with expectations from higher interest rates pushing the FOMC to reduce interest rates at the September meeting.
Technology and Communication Services suffered declines last week of -6.81% and -5% led by major declines from NVIDIA (-13.86%), Google (-7.63%), and Broadcom (-15.86%). The best performing asset class was bonds, with the full expectation that the Fed will cut rates by at least 25 bps, resulting in the Bloomberg US Long-term Treasuries gaining 3.15%.
As anticipation grows with the fast-approaching FOMC meeting on September 18 to cut interest rates, the sentiment for the week ahead will remain mixed until then. Key economic releases this week include Consumer Credit, Core CPI, and Core PPI. On the earnings front, Oracle (software), Adobe (software), and Lennar (residential) are set to report.
"The United States has the most innovative society on earth, and can continue to lead if its scholars and researchers are given the right incentives. So far, the U.S. government and Congress have focused most of their energy on slowing China down through ever more stringent export controls, and preventing U.S. companies from investing in Chinese technology. The bipartisan desire to "hobble" China has made important inroads, but the strategy is fast reaching its limits.
There is an alternative way to lead: jumpstarting our own innovation ecosystem by – among other things – fully funding the science portion of the CHIPS and Science Act." — Anja Manuel executive director of the Aspen Security Forum, "Winning the great race on technology", July 13, 2023
An Old Dog Can Learn New Tricks - Eli Lilly, a medicine company 150 years in the making
Eli Lilly has been on a remarkable journey in recent weeks, with its stock climbing more than 24%, a surge that caught the attention of many in the market. If you didn't know, Lilly is 150 years old, this impressive growth didn't happen by chance; it was underpinned by a robust second-quarter report that exceeded expectations across the board. The company saw its revenue jump by over 36% year-over-year, a significant leap highlighting its strong operational performance. As one of Lilly's powerhouse products, its diabetes treatment, Mounjaro, has experienced an astonishing 215% growth in sales on a YoY basis. With its Q2 earnings report exceeding expectations, the strong growth trend boosted investor confidence and prompted the company to raise its full-year revenue guidance by $3 billion. This bold move underscored the company's confidence in sustaining this momentum throughout the year.
However, the path to this recent success hasn't been without its challenges. Just a short while ago, Lilly faced some significant hurdles. When Roche made waves by announcing that their daily pill could help patients lose 6.1% more body weight than those on placebo over the course of just a month, it sent shockwaves through the market. Lilly's stock took a hit, dropping by 3.8% as investors reacted to the news. As if that weren't enough, the company faced another setback when Viking Therapeutics revealed its plans to explore a monthly weight-loss shot. This news further unsettled the market, causing Lilly shares to dip by an additional 4.6%.
But Lilly is no stranger to adversity, and the company quickly regrouped. They turned the tide by focusing on the long-term potential of their key growth product, tirzepatide. In August, Lilly reported groundbreaking data that showcased the immense potential of tirzepatide, revealing that the drug could reduce the risk of developing type-2 diabetes by an astounding 94%. This was a pivotal moment for the company and didn't go unnoticed. The two main drugs utilizing tirzepatide, Mounjaro, and Zepbound, not only met but exceeded second-quarter sales expectations by a substantial $973 million. This achievement was a testament to Lilly's ability to innovate and adapt in a highly competitive market.
Looking ahead, Lilly is not content to rest on its laurels. The company is actively exploring new avenues for expanding the use of tirzepatide. Recent research has provided further reasons for optimism, showing that patients who took tirzepatide for a year experienced a reduction in sleep apnea events per hour. Additionally, those on tirzepatide demonstrated improvements in symptoms related to metabolic dysfunction-associated steatohepatitis (MASH). These findings highlight the versatility of tirzepatide and point to the potential for even greater market opportunities in the future.
Adding to this wave of positive developments, Lilly's Alzheimer's drug, donanemab, received FDA approval on July 2. This approval was a significant milestone for the company, especially given the drug's promising results. Research has shown that donanemab can slow cognitive decline by 22% to 29% over 18 months across all patients. In patients with intermediate tau levels, whose efficacy was even more pronounced, the decline slowed by over 35%. This success has further cemented Lilly's reputation as a leader in medical innovation, drawing significant interest from analysts eager to track its progress.
Eli Lilly's recent performance is more than just a flash in the pan; it's a sign of a company on a solid upward trajectory. They are not only keeping pace with industry trends but actively shaping healthcare's future through bold innovations and strategic moves. By pushing forward with groundbreaking research and expanding the potential uses of its existing products, Lilly is setting itself up for continued success. Investors would do well to keep a close eye on this company, as it's clear that Lilly is not just growing but is laying the groundwork for even more significant opportunities on the horizon. The company is on a good trend, making all the right moves to stay ahead, and making efforts to paint a bright future for those who choose to follow its journey.
Source:
https://www.drugdiscoverytrends.com/lillys-tirzepatide-cuts-diabetes-risk-by-94-in-those-facing-obesity/
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.