Commodities & Energy Sector
Amid patchy global growth, the US economy remains resilient. However, tight monetary policy will eventually trigger a recession in the US too. The stock market rally has been very narrow. Stay underweight risk assets.
MacroQuant upgraded equities to overweight in February on a tactical short-term (1-to-3 month) horizon, but it continues to see downside risks to stocks on a medium-term (12-month) horizon. Consistent with the model’s relatively somber medium-term growth outlook, it sees more downside for bond yields on a 12-month horizon than on a 1-to-3 month horizon.
Naturally occurring hydrogen as a clean-energy source has the potential to satisfy significant energy demand growth at low cost. Oil and gas E+P companies and pipelines are ideally positioned to take a leading role in this clean-energy evolution, given their core competencies include large-scale resource extraction, storing and transporting gaseous commodities. Blending gold hydrogen with natural gas in pipeline systems could accelerate the industry’s learning curve in finding and delivering clean-energy fuels.
This report presents the main ways to invest in the Nuclear Renaissance; from exposure to physical uranium to equity plays alongside or outside the nuclear fuel cycle.
Seasonal weather and price variability in the first quarter will dissipate, which will reduce the agita caused by the recent inflation scare. This will increase the Fed’s comfort level in initiating a rate-cutting cycle in June with a 25 bp cut. With inflation well-behaved, real interest rates will move lower and gold prices will move higher. The rate-cutting cycle also will allow the USD to weaken as assets ex-US become more attractive; this will be bullish for gold. Physical demand for gold is expected to remain robust, along with safe-haven and central-bank diversification demand, due to heightened geopolitical uncertainty. We continue to expect gold to trade above $2,200/oz this year.
While 2024 will see various election risks, global geopolitical uncertainty is driven by the US election and its struggle with Russia, China, and Iran. The stock market can manage local domestic political risk. But it will correct upon a major outbreak of geopolitical uncertainty.