Join Michael Cembalest as he explores a wide variety of investment topics, including the economy, policy and markets.
The slowdown induced by central bank tightening is just starting. Be patient when adding risk to portfolios. Valuations have declined materially but the price paid for high earnings growth is still elevated.
We continue with three topics on electrification, which is the foundation of many deep decarbonization plans: electric vehicle adoption by gasoline super-users, the transmission quagmire and bans on combustion of fossil fuels for heating in favor of electric heat pumps
We start with a summary of the energy landscape, including the energy crisis in Europe, the recovery in the oil & gas sector and a warning label on industrial electrification and carbon sequestration
Surveying the Damage: Russia’s recurring war on Ukraine, equity market declines and the opportunity for bottom-fishing investors, the energy price surge/recession outlook in Europe, the impact of rising metals prices on EV battery costs, the COVID situation in Hong Kong and the latest on ivermectin
The bulk of this note is on China, Russia’s invasion of Ukraine and the surge in natural gas, oil, coal, electricity, wheat, copper, palladium and other prices which will probably drag Europe into recession, and impose a heavy growth drag on the rest of the world as well. But before getting into it, the chart below should hang in the offices of policymakers everywhere. Energy transitions are inherently slow moving, particularly when citizens of countries adopting them erect NIMBY barriers along the way (a topic we cover in this year’s forthcoming energy paper). As we have discussed often, capital spending by the world’s largest energy companies has fallen 75% from peak levels while global demand for oil, gas and coal are all at or above pre-COVID levels. Countries that reduced their supply of thermal energy at a much faster pace than they reduced their demand are paying a very stiff price for that right now. We expect some about-face movements on this in the days ahead.
Listen to Michael Cembalest, Chairman of Market and Investment Strategy, Monica Dicenso, Head of Global Investment Opportunities Group, and Kathryn Pasqualone, Client Advisor, North America Institutional, discuss the current situation in Russia and Ukraine, and the implications for investors.
Topics: Tracking the market risk unwind; Supply chain update; Ukraine; Invasion of the COVID Body Snatchers
On equity markets, the Lombards, SPAC investors, Bone-setters, George Washington, COVID bots and Omicron.
Some things just cannot be talked about. So in this year’s Thanksgiving piece, I wrote about something else.
“Help Wanted”. We expect semiconductor, vehicle and other goods bottlenecks to resolve themselves in the months ahead, and interpret declining business surveys as the result of a temporary supply shock and not a sign of inadequate demand. As a result, growth should rebound in 2022, and positions that benefit from reflation should benefit (energy, value and cyclicals). However, while goods bottlenecks will dissipate, the US will still face tight labor markets and rising wages that are at odds with current Fed policy
