Read on the Trading Floor - 19 Feb 2024
Today’s focus… ESG, Immigration, Inflation and much more
Macro Themes At Play
Theme 1 - ESG is no longer cool
Theme 2 - Immigration
Theme 3 - Is Inflation Back?
Further reading and listening of note
Theme 1 - ESG is no longer cool
There are have been historic boom and bust cycles that hit and hurt main street from tulips to dotcom to real estate but below the surface there are also trends that can dominate for years only to suddenly see the rules of the game change and/or investor appetite drop.
Having dominated asset allocation in the "reopening" year following covid, trends into ESG investing have done a full 180. Greta may still be protesting (private jets in Farnborough) but she was noticeable in her absence from the main stages at Davos, having taken opposing viewpoints on the future of the car industry Tesla has gapped down to Toyota whilst we all know Trump's view on the climate (What a second Trump presidency could mean for US energy policy). Year on year ESG, net zero economics just doesn't sell like it used to the electorate or asset managers. No wonder Starmer has rolled back his green pledge, copper is in a bear market as China's property market deflates, the residual second hand value of EV's is stark (turns out replacing your battery after 7 years does not come cheap), governments reduce the tax credit support for EV's, BYD floods the mkt with cheaper alternatives, petrol prices converge with electricity and JPM have headlined the drop outs from the Climate Action 100+ Group. ESG is no longer the headline act / dominant trend it once was as global authorities roll back their (inflationary) policies. How many world leaders will regret adding fuel to the fire as the covid reopening and ESG euphoria fought for the same exotic base metals.... Once the cost-of-living crisis is resolved, will ESG comeback on to the table?
ABN Amro - ESG Strategist - Green covered bonds take spotlight at start of the year
FT - Pivotal case in UK law begins over climate protest at JPMorgan offices
UniCredit - The overlooked challenges of the green transition
Odd Lots - This Is What's Hard About Building a US Domestic Battery Industry
Steno Research - Inflation is BACK! Position accordingly..
The Economist - Investing in commodities has become nightmarishly difficult
ZeroHedge - JP Morgan Pulls Out Of $68 Trillion "Climate Action 100+" Group
FT - Labour drops plan to backdate UK windfall tax on oil and gas
oilprice.com - Why Toyota May Have the Best Strategy in the EV Race
The Telegraph - Electric cars suffer ‘unsustainable’ depreciation in secondhand market
Source: Autotrader via The Telegraph
Theme 2 - Immigration
The US just experienced the largest population increase in a year ever. Mostly driven by the surge in immigration. (H/t to @TaviCosta and @dailychartbook for the chart below).
Despite the focus on the election trail, passing any legislation to secure the porous southern border is a dead issue in Congress. Biden is stuck between the left, progressive and immigration groups that want to see Trump's policies reversed and of course the Rep nominee in all but name criticizing him at every opportunity and fueling sound bites from the right wing media. The Biden campaign needs to resolve this trend and clarify his position if they're ever to make ground back in the polls.
Axios - Biden boxed in on all sides by historic immigration crisis
Slow Boring - The case for the immigration deal
The Dispatch - Immigration Reform Looks To Be Dead Indefinitely - David M. Drucker
Axios - Inside Trump's plans to deport millions from the U.S.
Axios - Biden boxed in on all sides by historic immigration crisis
Theme 3 - Is Inflation Back?
Inflation is the main constraint to how quickly and deeply the Fed can cut. Sadly, we need to wait now until end of month PCE for the next inflation print. On a quiet long weekend, harkster.com (your research inbox) has seen plenty of macro commentators discussing the CPI / PPI pop in Jan and if the consistent wage gains will propel inflation back higher, just as the soft landing was priced to perfection...
Ecoinometrics - The problem with the soft landing
The Lead - Lag Report: A Sharp Turn, Inflation Round 2?
Saxo Bank - How the debate about the US economy has shifted
DB CIO Weekly - The landing debate
Source Pinecone Weekly Brief - Walk in the Pines #150: This Weeks Best
but are we even looking the right way? Truflation is now at 1.65%!!!!!
Source: Truflation
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Top Pieces
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The Wolf Den - The Price Is Wrong
The Pomp Letter - Bitcoin Is Not A Popular Medium-Of-Exchange
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