This week’s stock market rumble contains a worrying message

Perfect collapse. That’s probably the most accurate description to describe the Friday caused by the Danish company Novo Nordisk stock market reaction.

The overwhelming number one on the Copenhagen Stock Exchange fell by more than 20 percent. More than 90 billion euros were wiped from the company’s market value and the company’s stock collapsed to the August 2023 price level.

The significance of Novo Nordisk’s collapse for the Copenhagen Stock Exchange is well illustrated by the fact that at the same time the general index of the entire Copenhagen Stock Exchange plummeted by more than 10 percent. It’s a scary reading for the stock market index.

All in the background is a tiny pill, more specifically the new Cagrisema slimming drug published by Novo Nordisk. According to expectations, the drug, which will go on sale in 2026, was expected to drop 25 percent of a dieter’s weight. According to research, however, it only achieved an average weight loss of 22.7 percent over 68 weeks.

Let’s recap: the company’s new drug actually makes its user lose a lot of weight, but not quite as much as expected. As a result, the company’s value fell by more than 90 billion euros and those who invested in the company lost a fifth of their money.

With common sense, what happened can only be described as Nut Crazy.

For example, at Lähi-Tapiola, a portfolio manager particularly follows the health sector Heikki Urpelainen stated In an interview with Kauppalehtithat based on the results, the slimming drug Cagrisema is not bad.

“The bar is so high these days. – – Should have reached the 25 percent weight loss that the biggest competitor has. This was left behind,” Urpelainen said in an interview with the newspaper.

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The company’s new drug actually makes its user lose a lot of weight, but not quite as much as expected.

Novo Nordisk’s plunge also gives Finnish stock savers food for thought. The concern is especially directed at the United States, where the artificial intelligence drug has inflated stock markets to new records day by day.

The world’s most followed stock index, the S&P 500, has risen by more than 24 percent this year and by more than 55 percent in the last two years. On the technology-focused Nasdaq, the readings are even wilder: this year there has been an increase of more than 31 percent and in the last two years almost 90 percent.

Stocks have become more expensive in the United States already so much that many have already started to fear a bubble bursting.

Nervousness can also be seen in the United States. On Wednesday, both the S&P 500 and the Nasdaq fell badly, when the US central bank (Fed) said that it may not lower its key interest rates in the future quite as much as previously expected.

The reaction is reminiscent of Novo Nordisk: the Fed’s message itself was not particularly dramatic, but the market reacted sharply. This week’s events signal that even a small negative message can cause a big reaction, as investors want to realize their bloated profits before the correction reaction that may lie ahead.

The importance of nervousness is increased by the fact that many investors have put their money in the US market. For example, the Stoxx Europe 600 index, which broadly follows European companies, has brought more than 8 percent returns with its dividends this year.

This year, the returns of the native Helsinki stock exchange have dropped more than 7.5 percent to freezing, and the yield index that takes dividends into account is also three percent in the red.

Compared to these figures, the return figures of the US indices are wrestling in a completely different series. If you wanted a return on your money from the stock market, the United States has practically been the only option.

The concentration of money in the United States, on the other hand, means that at some point the inevitable correction movement will cause many investors big losses.

It is impossible to predict the bursting of a bubble, but Novo Nordisk’s example shows that a sales wave can be started by something that seems quite harmless. Investors follow the market with the sell button sensitive and even small signals can trigger a huge wave, which in the end is based on nothing but fear and mass hysteria.

Those who put their money into the US market should hope that artificial intelligence will not fare like the Danish company’s pill.

The author is the head of financial affairs at HS.