Breakingviews - Biotech’s doldrums are a warning amid exuberance

on Tuesday in part because biotech companies are conserving capital. The sector’s doldrums are a warning sign, despite the broader market shrugging off recession concerns.isn’t an oracle, but it is worth paying attention to. Performance depends on future cash flows, investor sentiment, and access to lots of capital. The result is a fickle, but sometimes sensitive, weathervane.

The index’s gyrations tend to come in tandem – and sometimes slightly ahead of – trends for stocks writ large. In 2000, the index peaked weeks before the S&P 500 Index and hit bottom three months earlier. In the 2009 financial crisis, the biotech index peaked later, but both emerged at about the same time. And in the 2021 tech-led selloff, it peaked three months earlier and rebounded four months sooner.

Yet biotech stocks have been lackluster since. Since January, the index is down 2%, while the S&P 500 Index is up 19% and the Nasdaq Composite Index is up 35%. Perhaps some caution, amid a deluge of tech-happy market boosterism on the back of artificial intelligence hype, would be wise.

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