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Happy Barbenheimer Eve!
We hope this week’s newsletter finds you cool, healthy, and $1 billion richer. Whether you received a sudden windfall or not, we’ve pulled together the latest market and economic news to help you invest whatever funds you do have.
- The economic outlook is gradually getting rosier: Bank CEOs and economists alike are more optimistic that the US might avoid a major recession. Retail sales keep inching up, and hourly wages grew 4% in June from a year earlier, surpassing inflation for the first time in two years.
- Corporate America is doing all-right-ish: Analyst expectations were pretty low coming into this earnings season. Case in point: earlier this week, The Wall Street Journal called it the Terrible, Horrible, No Good, Very Bad Earnings Season. So far, though, that seems like an exaggeration. Yes, many companies are reporting less-than-stellar profits, but three-quarters of the first 30 S&P 500 companies to issue reports beat their earnings-per-share expectations, says Bank of America. Airlines are booming amid a travel resurgence, and big banks are A-Okay (with some exceptions), but earnings from Netflix and Tesla illustrate the mixed bag of results most companies are seeing.
- Markets rally, maybe more than justified: Stocks keep rising amid cooling inflation and better-than-expected earnings reports — more than some analysts and investors think is warranted. Soaring share prices are outpacing earnings-per-share growth, leading to what Wall Street calls a “multiple expansion.”
If you are looking for something to pass the time until the next Women’s World Cup match (in which case you might be pulling an all-nighter unless you’re one of our stalwart Aussie or Kiwi readers), we’ve got more news below, plus some ideas for investing in the booming healthcare sector. Stay cool out there!
News you can use
- In honor of Disability Pride Month, it’s time to spotlight businesses that are advancing disability inclusion, accessibility, and equity. The organization Disability:IN announced the winners of their annual Inclusion Awards, recognizing Walgreens Boots Alliance as Employer of the Year for its dedication to representing people with disabilities at all company levels. If you want to see how the companies in your portfolio stack up, check out the Disability Equality Index.
- The economy will feel the heat of scorching temps, say researchers. Extreme heat waves reduce labor productivity, damage crops, raise mortality rates, disrupt global trade, and dampen investment, according to research cited by The New York Times. This week, a Charles Schwab strategist also warned that investors should start “putting weather at the front of their investment minds.” Looking to insulate your portfolio? We have some thoughts on how to invest in the future of cool.
- New research might help WFH advocates build a stronger case for working in their PJs at home. Bankers are five times less likely to engage in financial misconduct when working from home, according to a peer-reviewed study. Unethical behavior is contagious, they say, so removing a trader from cutthroat office culture may lead to more ethical behavior.
- Amazon says its carbon emissions fell in 2022 for the first time since it began reporting on its footprint in 2019. The e-commerce giant, which aims to reach net-zero carbon emissions by 2040, just released its latest sustainability report. To help reach its goals, the company is investing in renewable energy and plans to put 100,000 electric delivery vans built by Rivian on North American roads by 2030 (there are currently over 2,600).
Asking for a friend….
We know there is a lot to think about these days, and it can sometimes be a bit overwhelming. To help with those nagging questions and so you have useful resources at your fingertips, here are a few links to resources and past stories relevant in these unique times:
- FWIW’s Guide to Long-Term Investing
- The updated edition of Nerd Out With Us: What We’re Reading and Watching
- Some of our favorite inflation-fighting strategies (and a few more)
- Investing in Women: A Guide to Gender-Lens Investing
- “Siri, What Is a Recession?”
Health and wealth
As self-admitted doom-scrollers, we find it’s always uplifting to see headlines about new advances and improvements in medicine that will change (and maybe even save) people’s lives. Maybe they don’t deliver as much dopamine to the brain as rescued teddy bears or heroic pets, but they’re up there. For example, just this week, the FDA approved the first antibody treatment to protect babies from RSV, a life-threatening lung infection that sends 1–3% of American infants to the hospital every year, and a new drug gave hope to patients afflicted with Alzheimer’s.
Like food, water, or renewable energy, healthcare is an area some investors focus on as they seek financial returns from companies that have a significant positive impact on society. The sector consists of a vast variety of industries and firms, and investors can find organizations innovating with a mission and purpose, like removing barriers to care, developing new drugs and treatments, improving patient outcomes, addressing stigmatized problems, or introducing disruptive technologies.
The sector has been underperforming the broader market this year as investor interest shifted away from safe, defensive stocks that do well during recessions. Barron’s also mentions two other matters of concern: “A newly emboldened Federal Trade Commission is challenging mergers in healthcare in a way that could disrupt business models. Pharma companies say that Medicare’s new ability to negotiate the prices of some drugs could hurt the industry.” But, as the report notes, this pullback also presents a buying opportunity for long-term investors.
As you start your research, you may find the sector overwhelming. We’re here to help you break it down so you can focus on the categories you are interested in.
- Pharmaceuticals: These are the large multinational companies developing, manufacturing, and marketing a wide range of drugs. Since they sell essentials, pharmaceuticals are considered a defensive play in the stock market. They can have immense power and impact, and we witnessed them play a crucial role during the pandemic with testing, vaccines, and antibody drugs. But these giants have been criticized for keeping drug prices too high and using patents and other tactics to stop the manufacturing of cheaper generic versions of medications. Sometimes they do cave to public pressure and new government penalties, as was the case with insulin makers in March this year. While some may avoid the industry for these reasons, other values-aligned investors see an opportunity to invest in innovations and push for change with their votes on issues like patents and pricing during annual shareholder meetings.
- Biotech: Developing new drugs and therapies is the primary focus of biotech companies, which tend to be much smaller in size than pharmas. Some biotechs, like Schrödinger, also license drug discovery platforms and tools to other companies. These stocks can offer outstanding returns, and analysts note that some of the top-performing stocks this year belong to the industry. For example, Inozyme Pharma, Genelux, BridgeBio Pharma, and ImmunoGen are all up over 300%. But since all drugs must go through various phases of clinical trials and FDA approval before they can be sold, experts warn that biotech shares can be incredibly volatile and risky. For example, FibroGen stock plummeted to all-time lows last month when a late-stage trial for its lung disease drug failed.
- Medical devices and equipment: Manufacturers of everything from diabetes glucose monitors, pacemakers, and surgery robots to teeth aligners can fall under this category of healthcare company. Just like drug discovery, medical technology is also a field where innovation can dramatically improve the patient experience and outcome.
- Providers and insurers: Several companies that own or operate healthcare facilities (like hospitals, walk-in clinics, or rehab, behavioral health, and surgery centers) and provide health insurance are also publicly traded in the US. There are also healthcare real estate investment trusts (REITs), like CareTrust REIT and Diversified Healthcare Trust.
How to invest
Investors can research individual companies in the healthcare space or take a broader approach with funds like the Health Care Select Sector SPDR Fund and Vanguard Health Care ETF. You can also find industry-specific funds, such as the iShares US Pharmaceuticals ETF, SPDR S&P Health Care Equipment ETF, and ALPS Medical Breakthroughs ETF.
Investors may also be interested in specific areas of innovation or trends in healthcare, like women’s health and femtech (Atossa Therapeutics, Biote, Organon), digital health (Oscar Health, Teladoc Health), artificial intelligence (Schrödinger, Recursion, Intuitive Surgical), gene editing (CRISPR Therapeutics, Vertex Pharmaceuticals), and 3D printing (Stratasys, 3D Systems). Some funds whose holdings comprise healthcare innovators include the BlackRock Future Health ETF, Goldman Sachs Future Health Care Equity ETF, ARK Genomic Revolution ETF, and ROBO Global Healthcare Technology and Innovation ETF.
As long-term readers of FWIW know, it is important to do your research and talk to your financial advisor before making any financial moves, and we cannot stress this enough when thinking about all the healthcare sectors we have discussed this week.
Identify your values
A lot of choices you make as an investor in the healthcare sector will depend on your own values. As we’ve discussed before, every reader of FWIW will prioritize the issues they care about when investing on their own personal terms and values. For instance, the enthusiasm for weight loss drugs (Hollywood can’t get enough of Ozempic) sent shares in companies like Eli Lilly & Co., Novo Nordisk A/S, Amgen, Viking Therapeutics, and Weight Watchers higher, and Bloomberg Intelligence expects the market to be worth $33 billion in 2030, but not everyone may approve of their widespread use. Areas like gene editing are controversial to certain religious groups, and some people don’t consider psychedelic drugs and medical cannabis to be dope.
At the same time, there are a lot of options and opportunities to look for investments that align with your values, and we hope this overview helps guide the research and learning you do when making investing decisions.
Before you go -
It’s the 155th birth anniversary of the first-ever golden retriever puppies, and there’s a party!
** FWIW team members own shares of Amazon, Eli Lilly, Netflix, Rivian, and Tesla.