Perception. So much of market movement is about perception in the moment. What do we, as participants, perceive and what does the market as, well, us, perceive will happen next? For example, yesterday’s move into record territory for both the Dow and S&P leaves a perception that the market is ready to break through and hold above the recent ceilings. True, the moves came on weak volume, but they came nonetheless and the market today is looking at those moves and trying to figure what will happen next. So far today, the market is holding past those levels, but will it sustain itself there?
Another way to look at yesterday’s market movement is the bears did not show themselves in force. If the sellers were truly interested in bringing the market down, they had their chance. The mass of buyers sat on the sideline and watched the game.
I think this reality, the one with money players sitting on the sidelines, is coming to an end. Although the S&P is at all-time highs, and it is a bit ahead of valuations on the P/E (price to earnings) ratio (it is just under 19), it is also sporting a 6.5% annual return. As well, earnings are coming in above expectations. This gives market players a new perspective, something new to look at, something other than Ukraine and the over-valued argument provided by the talking heads and celebrity analysts.
- With over 90 percent of S&P 500 companies reported earnings, investor focus has shifted to renewed merger and acquisition activity that provides a higher level of confidence that the economy is expanding.
There it is. Corporate money is flowing into M&A (mergers and acquisitions) and the economic data of late is pointing to a strengthening US and global economy. The market likes this and the result might well be a movement up into another leg of market growth. Those who have been waiting (such as myself) for the market to steady just might perceive the market is there. Another day or two of steadiness, and the perception might become reality. As always, we will see …
My research into biosimilars continues. I am now becoming familiar with the market orientation of the industry.
- Even-though the biosimilars market is rising, the price drop for biological drugs at risk of patent expiration will not be as great as for other generic drugs; in fact it has been estimated that the price for biosimilar products will be 65%-85% of their originators.
It appears that currently pricing is an issue, but this is not an impediment to growth at this stage. In fact, as of April, it appears money is flowing into growing the industry.
- Decision Resources Group finds that the number of publically disclosed biosimilar development projects has increased by more than 40 percent in the last 12 months. The majority of these development projects are yet to enter clinical development, but the 20 percent annual increase in the number of biosimilars in clinical trials indicates substantial advancement in the late-stage pipeline as well.
I am not sure where this is all going, but it is interesting for sure, and maybe, as well, it might be profitable. For now, though, I still have much more to learn.
Trade in the day; invest in your life …
