🍄 Trump’s trip 🐸

Biotechs working on psychedelic-based treatments have long been a staple in retail investors’ portfolios. Now, several are poised to gain federal approval, potentially turning them from cash-burning to money-printing.

• Saturday, Trump signed an executive order that would expedite approvals of psychedelic substances to treat mental illness, specifically calling out ibogaine, a plant-derived substance used in other countries to treat post-traumatic stress disorder. 

• Food and Drug Administration Commissioner Marty Makary said priority review vouchers, which allow for a fast-tracked review process, would be given to three psychedelic treatments this week. Shares of psychedelic biotechs — such as Psyence Biomedical, Compass Pathways, Definium Therapeutics, and GH Research — rallied on the news. 

• Their treatments use psychedelic compounds derived from plants, mushrooms, and toads to treat a range of mental health conditions. The drugs are administered at specialized clinics where patients remain under observation for several hours after a dose is given.

Dan Ahrens, manager of the AdvisorShares Psychedelics ETF, said institutional money is starting to enter a space that has been historically dominated by retail investors. Large banks like Deutsche Bank and Morgan Stanley have initiated coverage of psychedelic biotechs, which are predominantly covered by boutique research firms. 

The Takeaway

Companies developing psychedelic treatments face several hurdles, including the logistics of testing substances that are often considered dangerous drugs by the federal government, and at times an unfriendly FDA. 

The FDA has already approved a form of ketamine (which is technically not considered a psychedelic, though that’s a subject of debate) for treatment-resistant depression, called Spravato, which is a nasal spray sold by Johnson & Johnson. It’s expected to sell $2 billion worth this year. The active compound is esketamine, a component of the anesthetic and party drug ketamine. 

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Hedge funds are following retail traders into the stocks the masses never stopped buying.

• “As we kick off earnings for megacap tech stocks, this stood out: [hedge funds] have started buying Mag7 stocks again this month though positioning remains well below the peak levels seen in early 2016,” wrote Goldman Sachs’ Cullen Morgan.

• In early April, JPMorgan strategist Arun Jain noted that retail investors had basically been selling everything but the Magnificent 7 stocks as part of a more cautious stance due to the Iran war.

• Apple has been a long-standing exception to this trend, presumably because retail traders aren’t fond of its hands-off approach to AI.

Last August, Jain discussed how retail activity tended to “crowd in” institutional buyers in meme stocks, while Goldman’s John Marshall advised clients to piggyback on stocks beloved by retail traders. 

The Takeaway

Speculative, retail-geared assets proceeded to go on a tremendous run that soured in October. But there are some early indications that a similar bout of speculative fervor is bubbling up once more.

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During Tim Cook’s 15-year tenure as CEO, he oversaw Apple stock gains of 1,933%, nearly quadrupling the S&P 500’s return in that time. When John Ternus takes over the role, Wall Street has some big expectations — as well as recommendations — for what he needs to do to “define his own path and the future success of Apple.”

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• 📊 Fed: It appears that the administration’s nominee to serve as chairman of the Federal Reserve, Kevin Warsh, had a rough time in his confirmation hearing, as the market-implied odds* of his confirmation happening before May 15 dropped 5 percentage points to 25% over the course of the day on Tuesday.

• ⚾️ MLB: Earlier this week, the speed of light in a vacuum was just under 299.8 million meters per second, pi was slightly more than 3.14, and Euler’s number came in at just under 2.72. One additional constant that remained the same was the New York Mets completely blowing their season despite a roster overhaul and the highest cash payroll in the league; that losing streak sent their chances of making the playoffs from 71% in March to 36% as of last night.

*Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.

• Earnings expected from Tesla, GE Vernova, Boeing, AT&T, CME Group, Vertiv Holdings, Texas Instruments, Philip Morris International, Lam Research, ServiceNow, Southwest Airlines, IBM, Crown Castle, and Las Vegas Sands