Markets Swoon - and Biotech Moves Up?

Something seemingly odd happened yesterday - while the markets took a terrific hit, driven by turmoil in the bond markets and the financial services segment of equity markets, biotech and life sciences companies did all right - some little guys that have been pounded in recent days actually moving up. The question is why?

The official answer is "who knows?" - but if you are willing to follow a logic trail some things pop up.

Risk - hot and otherwise speculative money is leaving homebuilding and financial services and ending up in speculative biotech. Not a great argument, but possible. This is a trading scenario - the short termers leave one area and move into another. That being said, volumes were not all that great yesterday in biotechs so this may had an impact but it was small.

Lack of Sellers - Again, a trading perspective, and this makes more sense. If your stocks have been whacked and the market is melting, do you want to throw in the towel when everyone else is? Given market conditions yesterday, many people hung on assuming it was not the kind of day to bail out.

The Economy - Investors and traders are beginning to believe the subprime mortgage mess, and the home building mess, is going to spill over into the economy. Forecasts for growth are being pulled in and news on retailers and a weak back to school season have people looking to find growth. And everyone knows the strongest trends in growth for the next generation will be in life sciences and biotech - the product side of health care.

What to do?

Assuming I am right, and investors are turning away from other speculative investments, including oil and energy, and are also turning away from slower growing parts of the economy, take another look at what you can put into aggressive growth stocks and think life sciences.