From the studio

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Thought of the day

Tech stocks regained momentum on Wednesday, with the Nasdaq and the S&P 500 both reaching fresh record highs. Sentiment was aided by the tech-heavy composition of the CEO delegation accompanying US President Donald Trump on his visit to China, despite a hotter-than-expected producer price index reading pushed the 10-year Treasury yield to its highest level since July.

Strong earnings and sustained AI demand have underpinned the tech rally over the past seven weeks, and we maintain our conviction in the long-term growth of AI opportunities. But we also expect the secular trend of longevity to create multi-trillion-dollar opportunities over the next decade.

US tech and health care stocks comprise important parts of our AI and Longevity themes. Yet, the current S&P 500 market composition is heavily skewed toward the former over the latter. The share of US tech in the index has now surpassed its 2000 peak, while health care’s share is at its lowest in the past 25 years. This suggests potential for catch-up, in our view. Moreover, adding to Longevity may also deliver diversification benefits, with relative return correlation analysis versus the MSCI AC World showing the concept has generally modestly outperformed global stocks during periods when AI lagged.

Fundamentally, recent earnings and upcoming catalysts suggest that the Longevity theme is supported by both strong demand and a deepening innovation pipeline across regions.

The long-term obesity revenue opportunity is attractive. Key companies in the obesity market delivered strong first-quarter results that point to robust uptake for GLP-1 products in both diabetes and obesity segments. Newer oral formulations have also helped expand patient access, while pricing and competition pressures were deemed manageable. In fact, management teams highlighted that lower prices have unlocked additional market share, and the arrival of lower-cost alternatives in some markets has broadened the overall treated population and expanded underlying demand. Taken together, these trends support our view that the market for obesity treatments represents a significant long-term growth opportunity within health care, supported by a significant unmet need, innovation in GLP-1 therapies, and expanding global access.

Upcoming trial results may boost the long-term growth outlook. In addition to robust earnings, multiple late-stage trial results in cancer, cardio-metabolic conditions, and neurology in the second half of this year could provide further catalysts for select companies in our Longevity theme. While clinical risks remain, positive outcomes could support improved long-term growth outlooks and upward revisions to earnings. In the context of European health care, for example, we see a combined peak sales opportunity of USD 25bn from potential treatments for lung and breast cancer, a rare heart condition known as ATTR cardiomyopathy, relapsing multiple sclerosis, and myotonic dystrophy.

Stronger innovation capability in China offers opportunities. The Longevity opportunity set is not confined to the US and Europe, but also extends to China. In fact, the country has moved well beyond being viewed as a low-cost follower and is now increasingly recognized as a meaningful source of globally competitive drug assets. This is especially evident in the growing out-licensing activity, with Chinese-origin molecules taking a much larger share of global deal value and deal count. Multinational pharmaceutical companies are increasingly acquiring pipeline assets, partnering earlier, and using China as a key part of their external innovation strategy. This strong innovation capability and a more constructive policy backdrop underpin our positive outlook on China’s health care sector, and we see a particularly favorable setup in the contract development and manufacturing organization (CDMO) space.

So, we continue to see attractive opportunities in health care globally, not only because the sector offers defensive characteristics amid the ongoing geopolitical uncertainty, but also because of the long-term growth associated with the secular trend of longevity. Investors can consider complementing existing AI positions with select health care exposure, investing directly in our evolving Longevity selection or via diversified/building block approaches that blend health care leaders with non-health care companies as the value chain matures. Structured strategies may also help investors take advantage of pockets of volatility in underperforming or pressured health care companies to generate yield and buy at lower prices than today’s. These strategies may appeal most to those able and willing to bear the unique risks of using derivatives, including but not limited to issuer default risk.