The surge in data center use for AI platforms like ChatGPT is set to drive a substantial increase in electricity demand. Goldman Sachs and the Electric Power Research Institute predict a dramatic rise, with data centers potentially consuming 9% of U.S. electricity by 2030. This growth is also poised to impact natural gas and copper markets significantly, creating investment opportunities.
Tag: ETF sectors and rotation
Disruptive Theme of the Week: Defense Technology
The rise in global instability and underinvestment in defense technology has led to a surge in global military expenditures. European defense spending has reached new highs, with a focus on modern defense solutions. Several ETFs offer exposure to defense technology, including AI, cyber defense, robotics, and space defense, reflecting the evolving defense landscape.
Tesla: $570 Billion Market Cap Should Shrink As Expectations Are Unmet
Tesla’s stock has declined significantly, facing challenges in financial performance and profitability assumptions. Analysts have lowered expectations for volume growth and sustained profitability. Recent moves in FSD and Robotaxi are not expected to change the picture, and downsizing of the Supercharger business may worsen its position. This suggests a potential downward trend in Tesla’s market cap.
Checking In On The U.S. Consumer
The US consumer has experienced economic volatility, from the Covid shutdowns to a post-pandemic spending boom. With 70% of GDP reliant on consumer spending, the health of the US economy hinges on it. While aggregate consumer spending seems robust, lower-income consumers are struggling, resorting to unsustainable debt. The economy appears held up by higher-income consumers.
Copper Decouples From Base Metals & Oil Market Movements
Copper prices are diverging from base metals and oil, rising while other metals fall. This independence offers investment opportunities like the Sprott Copper Miners ETF (COPP) and the Sprott Junior Copper Miners ETF (COPJ). With the S&P GSCI Copper index and Bloomberg Copper Subindex increasing, miners may see future benefits. [Source: ETF Trends]
For Midstream, It Pays to Have Natural Gas Storage
Storage for natural gas is experiencing increased demand and higher rates due to current market conditions. Companies with storage capacity can benefit from arbitrage opportunities and higher contract renewal rates. This is driven by factors such as a contango in the natural gas prices curve, creating opportunities for storage businesses to thrive and consider expansion projects.
SCHX: Not Necessary To Own This Fund
The SCHWAB U.S. LARGE-CAP ETF (SCHX) holds 750 top U.S. stocks but slightly underperforms the S&P 500 index. Its strong performance since late 2022 still trails the index. With similar portfolios, SCHX’s underperformance may be due to its larger number of stocks. Given this, owning SCHX for diversification purposes seems unnecessary.
Five Key Charts to Watch in Global Commodity Markets This Week
Earnings season is underway, featuring Big Oil companies and heavy-machinery maker Caterpillar Inc. Five significant charts for the global commodity markets include insights on oil production growth, silver’s price surge, Brazilian corn harvest impact, peak LNG demand in Europe, and Caterpillar’s influence on mining and construction industries. These highlights provide valuable indicators for market trends.
Silver Demand Outstrips Supply For Third Straight Year
Silver demand exceeded supply for the third consecutive year in 2023, leading to a significant structural deficit of 184.3 million ounces, despite a 7% decline in total silver demand. Industrial demand, particularly in green applications, set a record, with expectations of further growth. Silver investment demand fell, but the Silver Institute projects a 2% demand increase in 2024.
Is a Commodities Super Cycle on the Way?
McAlinden Research Partners discusses the potential for a commodities supercycle. Despite stock market strength, commodities are varied, impacted by geopolitics and cycles. Factors include inflation, job market trends, US dollar strength, and 2024 election impact. While not at the supercycle’s beginning, it may be on the horizon. ETF options are limited, but some offer potential.
Buy 6 Ultra-Yield MLPs Now As Middle East War Could Explode
The major oil benchmarks have experienced significant fluctuations, with potential concerns over supply disruption due to Middle East conflict. Investors seeking energy exposure and income should consider Master Limited Partnerships (MLPs). Notable MLPs include Enterprise Products Partners, Energy Transfer, Hess Midstream, Mach Natural Resources, MPLX, and USA Compression Partners, offering high dividend yields and stable distributions.
Best Sustainable Companies to Own: 2024 Edition
The 2024 edition of Morningstar’s Best Companies to Own focuses on companies with wide moats and strong environmental, social, and governance (ESG) management. The ESG Risk Rating considers exposure and management, with companies like Keysight Technologies, RELX PLC, and Accenture receiving strong ratings. While not all are immediate buys, they offer long-term sustainability.
Silver and Gold: The Winning Bet
In his analysis, Michael Ballanger discusses the gold and silver market’s current state, recalling an anecdote about a client’s misguided investment in silver. He emphasizes the historical relationship between gold and silver, emphasizing the unpredictability of silver’s performance. Despite losses, the client ultimately shifted to bonds and utility stocks.
Think You Know REITs? Here’s the Real Story
The real estate and REITs sector has been making frequent negative headlines, but the outlook for REITs is more positive than suggested. Data centers and AI are driving growth in the sector, with record investment in renewable energy creating a favorable environment for further data center construction. This trend may appeal to investors seeking diversification.