🎙️ Gravitational Pull

😮‍💨 The S&P 500 is taking a chill pill.

We’re amid the first 5% dip of the year, thanks largely to worries over global tensions and stubborn inflation numbers.

But let's not forget that the S&P shot up ~28% in just half a year from October to March. Investors are taking a breather, as they normally do: 5% pullbacks happen about four times yearly, even in good times.

They're so common that since 1900, the market has spent more than half its time in 5% dips.

But hey, rally resumed? Maybe. Stocks rose Wednesday, then dropped, after Federal Reserve Chair Jerome Powell (mostly) ruled out that the central bank’s next move could be a hike.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the biggest stories in markets:

• Ozempic gobbles up a whole economy

• A new twist on the 401(k)

This, and more, in just 5 minutes to read.

Chart of the Day

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In The News

💊 The Ozempic Effect: Gobbling Up An Entire Economy

Novo Nordisk isn’t merely a pharmaceutical giant — the maker of Ozempic and Wegovy is now Europe’s most valuable company. And lately, its home country, Denmark, has been hooked on that success.

A new Bloomberg story explores its impact on Europe through its groundbreaking drugs Ozempic and Wegovy. The medications that target diabetes and obesity have become global phenomena, attracting widespread attention from consumers, investors, and policymakers.

Gravitational pull: Novo Nordisk has become Europe's most valuable company (over $570 billion). The country’s economy grew 1.9% last year, among the fastest in Europe, and almost all thanks to the pharmaceutical industry, led by Novo.

• Novo’s rise has transformed Denmark's economy; its market capitalization has exceeded its GDP. Its philanthropic foundation rivals the Gates Foundation in assets, and its tax contributions have boosted government spending, particularly in areas such as defense, environmental initiatives, and support for Ukraine.
  

• Novo’s trickle-down effect is enormous, even down to local flower shops, which have been “exceptionally busy preparing welcome bouquets for new Novo employees.”
  

• Said the mayor of Kalundborg, Denmark: "Today, it’s known as Novo City."
  

• Novo Nordisk's influence extends beyond economics, shaping educational priorities, research agendas, and political decisions. 

There are also risks, both for the company and its home market. The company's strategic decisions can have far-reaching consequences, impacting everything from public finances to academic research and employment prospects for Danish graduates. 

Why it matters:

Roughly two out of three U.S. adults are overweight or obese (69%), and about one out of three are obese. There’s a huge market here. 

Diabetes and obesity drugs have “won over the rich and famous, generated billions in sales, and blown open a new market for weight loss drugs, which Goldman Sachs estimates will reach $100 billion a year by 2030,” Bloomberg reports. 

Novo risk: Novo is a case study highlighting the potential pitfalls of over-reliance on a single company for economic growth. Although Novo's success has brought prosperity to Denmark, there are concerns about its sustainability and broader implications for Danish society. 

• Rising public spending on Novo's medications has sparked debates about healthcare costs and prompted the company to adjust its pricing strategies: This week, Novo Nordisk cut the price of Ozempic in Denmark by a third from $188 to $125. They charge Americans about $969.
  

• Some warn that Novo could become a curse, pointing to how Finland endured a long recession after Nokia lost its footing in mobile phones with the arrival of the iPhone.
  

• Nearly all of Novo Nordisk’s revenue is earned overseas, more than half in the United States alone. It’s the largest corporate taxpayer in Denmark, paying 15% of the country’s entire corporate tax intake last year.
  

• Novo Nordisk's dominance presents opportunities for Denmark's pharmaceutical sector, but diversifying the country's economy and reducing dependency on a single industry player present challenges. 

Read more (Bloomberg)

More Headlines

🎧 Inside Apple’s domination of the headphones business

🤑 Americans were paid an additional $235 billion last year, thanks to Fed

🗣️ Warren Buffett’s youngest son discusses father’s legacy 

💻 How long it would take a hacker to brute force your password

🏃‍♀️ Climbing stairs is associated with living longer, per new research

💰Gold pocket watch from ‘Titanic’ sells for $1.5 million

🤔 BlackRock’s Plan for Your Retirement: A Monthly Check

Could the old-fashioned 401(k) be in for a facelift?

Here’s a twist: 401(k) plans that offer employees retirement paychecks they can rely on for life. 

BlackRock's CEO Larry Fink sees this option as becoming the default retirement investment strategy. Their “LifePath Paycheck funds,” incorporating annuities, aim to address the looming U.S. retirement crisis.

Avangrid and 13 other employers have adopted the funds as their default investment option for around 500,000 employees so far. 

What to know: The funds resemble standard target-date retirement funds, adjusting asset allocation as retirement approaches. 

• However, they start investing in annuity contracts at age 55, comprising roughly 30% of the portfolio by age 65.
  

• Employees between ages 59.5 and 72 can purchase an annuity, guaranteeing a lifelong paycheck, with the remaining 70% of the portfolio still invested in stocks and bonds or redeemable for cash.
  

• BlackRock CEO Larry Fink says the new plan "will one day be the default retirement investment strategy,” adding: “Even people who know how to save for retirement still don’t know how to spend for it."

Why it matters:

The future? Concerns about fees and complexity surround annuities within target-date funds. One analyst noted, "There are fees in the annuity spread that you can’t see. That opaqueness opens itself up to the chance of litigation risk."

• Proponents argue they simplify retirement income planning without requiring financial advisors. 
  

• BlackRock's funds offer low fees, with an annual expense ratio starting at 0.1% and rising to 0.16% after age 55, compared to the industry average of 0.48% for target-date funds.

The industry's focus on such products is growing, driven by the increasing number of retirees among the Baby Boomer generation. 

• While BlackRock's offering has gained traction, Vanguard and Fidelity, the largest target-date fund providers, have yet to announce similar plans. Fink says that will change soon.

Read more

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Quick Poll

On Monday, we asked: Do you believe heavy taxation of large landlords is an effective way to discourage institutional ownership of single-family homes?

— Results were split evenly. As for Yes, responses included, “Big companies already have significant tax advantages and access to cheap money. Reducing their profit margin is all that is needed to move their interest to some other part of the economy. ”

— Another: “Landlords get two significant tax breaks - depreciation and mortgage interest deduction. Removing them would reduce the appeal of single-family homes as rental properties.”

— On the other end, readers said, “I am not 100% certain, but I believe that they would probably just absorb the taxes into their costs and increase rents.” Another: “Large business finds creative ways around taxes. Need to make it illegal to own so many homes.”

See you next time!

That's it for today on We Study Markets!

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