Ryan Stancil,
Editor
July 30, 2022
Are we in a recession?
That depends on who you ask. Looking at the textbook definition of the word, we are. According to officials in the administration, we aren’t. Either way, corporate earnings are coming out and it wasn’t a rosy picture for many. For those who did see good fortunes, this may be the last time for a while, according to investor Michael Burry (of “Big Short” fame). Have a look at the stories below to see some of the big things that have happened in the markets over the past week.
Since last week:
As companies release their Q2 earnings, the Fed did what many said they were going to. Now, all that’s left is to wait and see what kind of effect it has on the broader economic picture.
The Fed Makes Its Move
The Fed hiked interest rates, just as many predicted. That means it’s gotten more expensive to borrow money… so your car loans, mortgage rates, and credit card rates are going to cost you more now. The Fed is doing what it can to try and tame inflation, but Chairman Powell has already opened the door to possibly slowing down rate increases at the next Fed meeting in September. Only time will tell what happens, but you should keep your investing defensive in the meantime.
Joe Manchin’s Late Surprise
In a move that came as a surprise to just about everyone, Senate Democrats struck a deal with West Virginia senator Joe Machin that includes substantial financial backing for climate change initiatives. Among other things, the bill will include extensions of credits for wind and solar, rebates and credits for EVs, and tax credits for clean energy manufacturers. The bill comes to the tune of $369 billion and is one of the biggest steps in revamping the country’s energy infrastructure. The investment opportunities for this will be among the biggest of the next decade.
GM Goes Electric
General Motors is going all in on its electric vehicle plans, and that includes securing the materials for batteries. This past week, the automaker announced deals that will ensure it gets the materials it needs for battery manufacturing for its growing lineup. GM plans on being out of the combustion engine game by 2035. Expect to see this trend spread to other car companies over the next few years, and expect the price of related commodities like lithium to climb in response. That means the companies that can provide those metals are set to do very well.
Germany’s Possible About-Face
Germany has long held firm on being against nuclear power, but that may soon change. Thanks to its natural gas supply from Russia being cut off, Germany is rethinking exiting nuclear power by the end of the year. Staring down an energy crisis in the coming winter, the country’s leaders are now saying that “all options should be on the table.” So Germany could be using nuclear power at the end of the year or even beyond that. Either way, companies that can provide uranium will come out the winners.
What to Look For:
The Fed raised rates and may or may not do it again in September. With the economy slowing, sentiment still down, and inflation still on everyone’s mind, the Fed may blink sooner than later. It’s anyone’s guess what will actually happen, especially as we get closer to midterm elections. In all likelihood, we will sink further into recession while the mainstream tries to deny the reality of it.
Ryan Stancil
Editor, Daily Profit Cycle