Trends may be shifting in favor of biotech stocks in 2025 after several years of poor performance, but it would still be wise to place your bets carefully on some of the most innovative names. 'We\u2019re still optimistic on the outlook for biotech,' said Stacey Sears, senior vice president and portfolio manager at Emerald Advisors, in an interview with CNBC. 'I think the underperformance attractive.
' The SPDR S & P Biotech ETF (XBI) has risen more than 2% year to date, but is down 9% just since the election as investors question what changes the Trump administration will bring. Investors will gain clarity on the regulatory and policy environment in the months to come, Sears said, but the meantime the current uncertainty is creating an opportunity, especially among the small- and mid-cap stocks she monitors. Waiting for M & A to pick up In recent years, biotech stocks have been held back by a dearth of merger and acquisition activity and high interest rates, which raised companies' cost of capital and remained volatile even after the Federal Reserve began cutting earlier this year. But innovation has been humming along and the new year is likely to bring a fresh round of drug approvals and launches that could push stocks higher, analysts say. If yields cooperate, 'and then we finally start to get a more meaningful uptick in M & A activity, along with continued advancement from a clinical perspective, I think that will bring eyes back to the group,' said Sears. XBI 5Y mountain SPDR S & P Biotech ETF over the past five years Many industry watchers point to a looming 'patent cliff' as a driver for future dealmaking. Large pharmaceutical companies will need to replace more than $300 billion in revenue between now and 2028, and they will look to innovative biotechs to fill in the gaps, according to Yuri Khodjamirian, chief investment officer at Tema Funds. 'The cliff really picked up this year, but it\u2019s going to get strong over '25 and '26,' he sai
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