Biotech Could Be One of 2026's Biggest Winners, and This ETF Is Perfectly Positioned

"First Trust NYSE Arca Biotechnology Index Fund ( NYSEARCA:FBT) has surged 29% over the past year, nearly doubling the S&P 500's return. The ETF's 5.4% gain in the first week of 2026 suggests momentum isn't slowing. FBT tracks about 30 biotechnology companies using an equal-weight methodology, rebalancing quarterly. This approach gives investors diversified exposure across genomics leaders like Exact Sciences (NASDAQ:EXAS) (up 76% in the past year), established players like Regeneron (NASDAQ:REGN) (up 13%), and beaten-down names like Moderna (NASDAQ:MRNA) (up 20% in the first week of 2026 alone). With a 0.54% expense ratio and $1.4 billion in assets, it offers pure-play biotech exposure without betting on a handful of mega-caps."

"The biggest tailwind for biotech in 2026 isn't any single drug approval. It's the interest rate environment. After the Federal Reserve cut rates three times in 2025, some officials are forecasting another 150 basis points of cuts this year. Lower borrowing costs directly benefit biotech companies, which often burn cash for years before generating profits. Janus Henderson portfolio managers noted in their 2026 outlook that healthcare stocks are trading at some of the lowest relative valuations in the sector's history. After years of policy uncertainty weighing on the space, fundamentals are improving while valuations remain depressed. That combination creates room for significant upside when investor sentiment shifts, which appears to be happening now."

FBT, an equal-weight biotechnology ETF tracking roughly 30 companies and rebalanced quarterly, rose 29% over the past year and gained 5.4% in the first week of 2026. The fund provides diversified exposure across genomics leaders, established biotechs, and previously beaten-down names, with a 0.54% expense ratio and $1.4 billion in assets. The primary 2026 tailwind for biotech is a falling interest-rate environment after multiple Federal Reserve cuts, which lowers financing costs for cash-burning biotechs. Depressed valuations combined with improving fundamentals create upside potential if investor sentiment continues to shift.

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