Biotech Sector Poised for Year-End Rebound: Why Falling Interest Rates Matter

The biotech sector has been lagging, but recent momentum suggests it could flip to market leader by year-end. Rate cuts, expected by the FED, could be pivotal as biotech stocks are rate-sensitive and rely heavily on external funding. Lower rates would improve sentiment and risk appetite, enhancing the value of capital and accelerating momentum. Investors can play this potential shift through ETFs like the iShares Nasdaq Biotechnology ETF, which tracks industry heavyweights like Amgen and Regeneron. Technical levels, such as the $140 and $150 areas, could prove decisive in the weeks ahead.

The biotech sector, once a laggard, has shown signs of renewed momentum in recent months, raising the possibility of a significant shift by year-end. Despite underperforming the broader market year-to-date, the iShares Nasdaq Biotechnology ETF (IBB) has surged 12.47% in the last quarter, outpacing the S&P 500's 9.36% gain Biotech Sector May Flip to Market Leader by Year-End^[1].

Key factors driving this potential turnaround include the expected interest rate cuts by the Federal Reserve (FED). Lower rates could significantly benefit biotech stocks, which are among the most rate-sensitive sectors. Lower borrowing costs, extended cash runways, and improved funding accessibility are crucial for biotechs, especially early-stage firms with high research and operational expenses Biotech Sector May Flip to Market Leader by Year-End^[1].

Investors can capitalize on this potential momentum through ETFs like the iShares Nasdaq Biotechnology ETF. This fund offers broad exposure to industry heavyweights such as Amgen, Regeneron, and Gilead Sciences. Technical levels, such as the $140 and $150 areas, could prove decisive in the weeks ahead Biotech Sector May Flip to Market Leader by Year-End^[1].

Regeneron Pharmaceuticals (REGN), a key holding in IBB, has been a standout performer in 2025, up nearly 28% year-to-date. The stock is consolidating near 52-week highs and could set up the next leg higher if it breaks above $120 Belpointe Asset Management LLC Decreases Stock Position in Regeneron Pharmaceuticals, Inc. $REGN^[2].

Institutional investors have also shown interest in Regeneron. Belpointe Asset Management LLC reduced its stake by 48.7% in the first quarter, while other major investors like Vanguard Group Inc., Price T Rowe Associates Inc. MD, Amundi, Goldman Sachs Group Inc., and UBS AM have increased their holdings Belpointe Asset Management LLC Decreases Stock Position in Regeneron Pharmaceuticals, Inc. $REGN^[2].

The biotech sector's years of underperformance have tested investor patience, but recent developments suggest a shift may already be underway. With rate cuts on the horizon, easing capital conditions, and strengthening technical momentum, the sector could be moving into a new chapter of leadership.