Thomas: Fragile is the word we agreed on

Key Concepts:

• Fragile market sentiment
• Presidential influence on the market
• Trade negotiations and tariff outlook
• Forward-looking vs. backward-looking data
• Fed rate cuts
• Biopharma innovation
• Royalty Pharma (royalty structure, tariff resilience)

1. Market Sentiment and Fragility:

• The market's recent gains are primarily based on sentiment rather than concrete data.
• The market is described as "fragile" due to its reliance on positive sentiment and the need for concrete data regarding trade negotiations and tariffs.
• The market's hopefulness needs to be sustained by tangible progress in trade negotiations and clarity on the tariff outlook.

2. Presidential Influence:

• Jim Cramer's statement: "Right now Trump owns Wall Street and only he can decide if that's going to be a good thing or a bad thing."
• The president's voice and actions significantly influence market behavior.
• Market responds positively to presidential statements that align with its desires, particularly when reflecting the input of Secretary Mnuchin.
• Inconsistency from the White House can negatively impact the market.

3. Economic Data and Fed Rate Cuts:

• The market is realizing the need for concrete data to support its optimism.
• TD Cowen's rate strategist moved up the expected timeline for the first Fed rate cut to June (previously July).
• The president's view is a marginal factor in the Fed's decision-making process.
• The Fed is likely to be proactive due to the backward-looking nature of economic data.
• Q1 performance was based on "pull through," making it unclear how much is sustainable.

4. Investment Pick: Royalty Pharma:

• TD Cowen focuses on durable investment themes, with biopharma innovation being a critical one.
• Royalty Pharma is presented as a tariff-resilient investment option in the biopharma sector.
• Royalty Pharma negotiates guaranteed contractual royalties on future pharma revenue streams.
• The company has a diverse portfolio across many biopharma companies and underlying assets.
• Royalty structure provides yield without the tariff impact faced by operating pharma manufacturers.

5. Conclusion:

The market is currently in a fragile state, heavily influenced by presidential statements and sentiment. While earnings have been positive, the focus is on future prospects and the need for concrete data, particularly regarding trade negotiations and tariffs. The Fed is expected to be proactive in cutting rates, and Royalty Pharma is presented as a durable, tariff-resilient investment option in the biopharma sector.