Morgan Stanley’s analysis of historical data suggests that potential Federal Reserve rate cut(s) should have a favorable impact on Biotech stock performance, the firm said in a note on Friday.
In addition, it should also benefit the financing environment and the M&A outlook.
“In our view, there have been green shoots pointing to the beginnings of a rally in the Biotech industry,” wrote analysts at Morgan Stanley. “Assuming rates trend on a downward trajectory, new innovation delivers, and M&A continues, we see the potential for another cycle of sustained outperformance for the industry.”
The investment bank’s analysis suggests that historically, a rate-lowering cycle and lower-rate regime has had a favorable impact, which they believe “provides a favorable backdrop for the industry this year.”
However, they also acknowledge that ultimately fundamentals (data, regulatory action and launches) will also be an important driver of individual stock performance.
