Due to changes at the global level like protectionism and political chaos, businesses are facing certain changes and ongoing challenges. Nevertheless, there’s always a way for a business to survive despite the changes and challenges. Having said this, the business world is never short of ways to fly high. This also holds true for the stock market.
New opportunities were revealed at the Credit Suisse (CS) Global Super Trends Conference. Nannette Hechler and Daniel Rupli, Head of Economics and Research & Head of Single Security Research respectively, looking at impactful societal changes. They feel these can bring huge advancements in the investment field.
Various banks say that the “Millennials tide” has begun. This tide will drive the crowd of young people age 39 and below. Reports explain that they are dedicated to drafting the future of businesses. So, what sectors should you be paying attention to right now according to Credit Suisse?
Stock Market Sectors Affected By This:
Security and Defense Stocks
It will give a hike in security and defense investments as this sector holds more importance in things like public security. Further, terrorism and technology threats and the geopolitical situations of Syria and China are the centers of concern for the world.
Another area which is affected is the introduction of the hypersonic missile system and massive data breach in Russia that is a pressure point for countries like the US. Also, the increasing concern against terrorism in the USA is focusing more on defense investments. Similarly, defense security for privacy is also much needed. Hence, cybersecurity is extremely important.
The market opportunity continues to expand. The Weapons Detection Systems market will grow from $5.3B in 2020 to USD $7.5B by 2025, at a Compound Annual Growth Rate (CAGR) of 8.2%. By 2020, USD $1.5B will be spent on urban security in North America.
An Atlanta-based startup backed by a wealthy Canadian is preparing to market a security system developed by MIT Lincoln Labs that could detect public shooters before they fire. For those looking at companies in this sector, for instance, MIT has licensed the technology exclusively to Liberty Defense to bring it to market. Liberty Defense (SCAN.V) is ready to tackle the security challenges in the urban security market with its groundbreaking HEXWAVE product. Click Here To Read More On This Major Breakthrough!
Clean Energy Stocks
Due to awareness and pressure by the public, the government will focus on investing in the creation of renewable energies.
Credit Suisse report says that many electricity companies are on the way to inculcate these changes. And even the bank is asking the large producers to make solar and wind energy for the projects of renewable energy. Such moves will bring huge profit without any recurring in-out charges.
According to the reports. It is quite sad to know that there is still a lacuna of this awareness in Europe Transport &infrastructure
Credit report says that transport sectors have a bright business future. One of the greatest examples of this is the Thailand Airport. Due to the high numbers of passenger crowd for the last 10 years, it has gained a triple profit. Another example is Vinci. It has grown impressively by acquiring Gatwick Airport and now it is planning to acquire Aeroports de Paris.
In the context of infrastructure also, the world is heading forward. G-20 projects are the best example of this growth. It is estimated that by 2040, $14.8 trillion will be invested. Even the US and China are planning for a combined trade in infrastructure.
Following this growth, the Federal Reserve of America would slow down the interest rate benefiting the companies investing. MSCI World Infrastructure Index mentioned a profit hike by 9.97% by 29th March. Sectors like utilities, telecommunications, Airport, etc. were included in this index.
Credit Suisse says 5G technology will also see growth. As we can see, South Korea’s introduction of commercial 5G at the end of the last year and the USA also headed towards better internet speed. Next, Japan, China, and Europe are expected to be in this run, most likely after 2020.
After such introductions, the dealers of 5G networks are expecting to see a hike in their profit. Huge investments are awaiting as people will keep on modifying this sector.
The report says, Telecom Italia & Vodafone Italia will enter into an agreement for 5G network sharing and in such case, more towers and bandwidth installments will hike investments.
Solar Energy Stock Prices See Brighter Future
The future for solar energy plants and industry looks bright (no pun intended). Even after the government’s inclination towards fossil fuels and the high tariff rates levied, Q1 of 2019 saw a 10% rise in the installation digits to 2,674 megawatts of Solar.
A report- Solar Market Insight Report 2019 Q2 – was published by SEIA and Wood Mackenzie Power & Renewables. It shows how solar power has set a record for itself, strengthening the residential and utility-scale projects. States have been actively installing solar; take, for instance, Florida, which installed the biggest percentage of solar in Q1.
NextEra Energy (NEE – Stock Info)’s subsidiary, Florida Power and Light was one of the major reasons for this high installation rate. This happened after the announcement of procurement of 1,500 MW of solar. The company plans to expand this installation number to 10,000 MW by 2030. This implies a new market development possibility.
The Increasing Sales Figure Might Set Another Record
On the other hand, California used to lead for solar installations, but it reported a 538 MW installation figure in Q1. While in 2017 and 2018, California had accounted for 2,599 MW and 3,396 MW solar installations respectively, Florida had installed a total of 758 MW in 2017 and 857 MW in 2018.
Thus, the sudden boost in the Floridian install came as a pleasant surprise but the residential and commercial solar is yet to show such progress in Florida. With the solar leasing being pushed to next year and the push back on net metering by utilities, Florida still has a long way to go.
Residential solar installation alone rose by 6% as compared to the previous years’ figures. A total of 603 MW of solar was installed in Q1. This helped companies like Sunrun (RUN – Stock Info) and Vivint Solar (VSLR – Stock Info) make it through its difficult conditions. Utility Solar, on the other hand, with installation count of 1,633 MW, is also skyrocketing.
Florida seems to have been a significant contributor to this figure. The boom in utility-solar has changed the projected installations for the state. This went from 6,000 MW to 9,000 MW expected over the next five years. Meanwhile, nationwide the forecasted figure increased by 1,200 MW in 2019.
What Does The Future Hold?
The sales and marketing cost have been high and been one of the major roadblocks in the industry’s growth. The commercial solar, however, remains a major concern. With the policy changes in California, Minnesota, and Massachusetts affecting the industry, the installation of solar decreased by 18%. This total was only 438 MW.
The increased demand for solar is a benefit for the companies. Solar-panel provider giants like First Solar (FSLR – Stock Info) and SunPower (SPWR – Stock Info) could greatly benefit. The companies look forward to an enthusiastic surge in demand. Even companies like Sunrun, Vivint Solar and SunPower have gained with the growing volumes of residential installing solar.
After two hard years of policy headwinds, this came as a hopeful rescue for the companies. The higher volumes promise a better future for the stocks of the companies.
President Trump’s New Rule To Encourage Revival And Growth Of Coal Industry
President Donald Trump has come up with a new regulation to help strengthen the coal industry so that it could gain back its market spot. This regulation, however, would overrule former President Barack Obama’s policy over climate change.
Amendment Of The Affordable Clean Energy Rule
Announced on Wednesday, the new plan involves amendment of the Affordable Clean Energy rule by the Environmental Protection Agency. This move would help support the coal industry. It doesn’t necessarily mean that it would stop the further dissolution of various coal-fiber plants. This move ratifies the Clean Power Plant – Obama’s key policy addressing climate change focused on suppressing greenhouse gas emission.
Under Obama’s era, there were state wise standards set on emissions of carbon dioxide. Trump’s rule, on the other hand, would set it on a more individual level, based on the megawatt of electricity generated by the plants, thus, in turn, increases the efficiency and productivity of these firms.
The rule would set free the plants and industry from the shackles of restrained carbon dioxide emission greatly benefitting the coal industry which is the biggest emitter of CO2. This would, of course, mean, increased soot and smog emissions leading to higher percentages of premature deaths and respiratory problems.
Obama’s Clean Power Plant
The coal industry, which had quite vehemently blamed Obama’s Clean Power Plant for its gradual decline, are now quite enthusiastic with the chance to compete with the other cheaper energy generating sources like wind or solar. Many, including energy experts, argue that the new policy would not be able to help the coal industry bounce back.
Furthermore, the demand for coal started falling well-before the implementation of Obama’s rule. According to them, people are already more comfortable with the cheaper and renewable clean sources of energy, and in such a scenario, the lost foothold of the coal industry is very difficult, if not impossible.
Trump’s new rule would face many challenges and oppositions, which include several environmentalists. The new rule also includes various climate-conscious states. The administration would have to work twice as hard to gain supporters for the new rule.
This considers the obligation to regulate the greenhouse gas emission under the Clean Air Act. The Clean Air Task Force advocacy director believes it to be just another unlawful preferential treatment being provided to the coal industry under the false name of climate rule.
Why Were Refining Stocks Under Pressure In May?
Last month, many industries went into turmoil and one of those was the oil refinery industry. This was due to the global events that shook up the capital markets. Some of the better-known oil refiner stocks like Marathon Petroleum (MPC), Phillips 66 (PSX) and Valero Energy (VLO) took a nosedive. According to information from S&P Global Market Intelligence, the declines for the month ranged from 12% to 23%.
There is a number of factors which are responsible for the decline in oil refinery stocks for the month of May. Perhaps the biggest reason is the escalating trade tensions between the United States and China.
It was in May that the talks broke down between the two nations and the tariff wars started yet again. The trade standoff has resulted in a significant drop in the demand for refined oil products. Consequently, the profit margins of the major oil refinery companies were hit.
However, in addition to the trade war with China, the United States had also threatened to impose tariffs on Mexican goods if the immigration issue was not tackled. That was another negative trigger for oil refinery stocks since a hike in tariffs would force Mexico to send a lower quantity of crude oil to the United States and the refinery companies would need to look at more expensive sources. On top of that, the current issues in the middle east have not helped the matter either.
The major companies in the industry reported significant drops in their earnings, with Valero’s earnings nose-diving by 41%, while Phillips 66 recorded a 50% drop in earnings. On the other hand, Marathon Petroleum earned $11.17 for each barrel in the first quarter as opposed to analysts’ estimates of $13.85 per barrel. The margins were hit due to higher oil prices.
Despite the troubles that the companies went through in May, the future may not be as gloomy. One analyst stated that Valero and Phillips 66 could be a good prospect for investors since the stocks are being weighed down by trade issues rather than any fundamental problem with margins. In fact, JP Morgan has already upgraded Valero and classified it under overweight.
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