Citigroup has been asking its investors to keep faith in the current global equities rally in light with historic rallies and data it has been observing lately.
MSCI All-Country World Index has risen 24 percent recently, like the gains it had back in the 1980s. much of the rally is being caused by rising bond yields and improving corporate profits. It has been widely been seen as the economic revival seen in the era of President Ronald Reagan. This thinking of Citigroup is being shared by other international banks as well. JPMorgan Chase & Co., Morgan Stanley and BNP Paribas SA have all been optimistic about the global rally. However, there is still economic and policy uncertainty as political risks loom across the European Union and the US.
Nevertheless, US equities themselves have seen record breaking highs in equity markets due to faith in policy measures taken by President Trump. The gains are being led by manufacturing and the banking sector in particular. Managing partner of Harris Financial Group in Richmond Virginia, Jamie Cox said, “Investors are willing to say the prospects for growth are higher now than they were, and they’re not just saying it, they’re committing capital.” The rally can be seen in commodities as well where Crude and Brent oil, as well as precious metals such as copper and gold have seen sizeable gains.
China continues to increase its investments in renewables and green energy by approving another batch of vehicles as part of its green car project. Recently, it approved investments of $896.5 million in two green car project companies. Fujian Yudo New Energy Automobile Co will receive $275 million and t he National New Energy Vehicle Co. will receive $621 million, helping produce over 115,000 new electric vehicles per year.
China has already been selling a large number of electric cars lately. It sold 507,000 cars last year, up 53 percent from 2015. Many of these vehicles were made by BAIC Motor Corp Ltd, Geely Automobile Holdings Ltd, BYD Co Ltd, Chongqing Changan Automobile Co Ltd, and Chery Automobile Co Ltd. China provides subsidies over electric cars to both manufacturers and consumers, helping consumers buy them for cheap while the government helps in the purchase costs.
Moreover, it has also increased regulation over the way batteries are made in the country. Major battery manufacturers for China include Contemporary Amperex Technology Ltd that produced the bulk of NCM batteries, used by Chinese electric car manufacturers. At a later stage, China is also ensuring to export many of its models that are currently under consideration for international rollouts. Over 2,1193 car models have already been approved by China for domestic markets.
Airline stocks have seen three–month lows over the past few days. First is the possibility of an outrage and protests due to the January 27 Executive Order signed by president Trump that bans people from seven Muslim countries to enter the United States, while other worries include the fate of NAFTA and dealings with Mexico and China that can hurt incoming traffic. Delta Air Lines Inc. has been having their share of troubles too, with over 150 flights being canceled due to a recent computer outrage.
Investors are worried that many countries may retaliate the ban and or more countries may end up on the banned list as President Trump tries to make the border more secure by curbing on loopholes found in the immigration system.
Major airlines such as American Airlines Group Inc and Delta saw declines of over 6 percent. An analyst at Tocqueville Asset Management and a shareholder in Delta, Paul Lambert said, “These things are overblown generally, but in the moment people freak out. This kind of uncertainty over who’s getting visas is a valid question, but it’s more bark than bite.”
Another major worry is how the Boeing and Airbus deals with Iran will unfold. Iran has made a deal to buy over 130 Boeing jets over the years, which the trump Administration is reluctant to stop, as they wish to backtrack on the Iran Nuclear deal signed by President Obama.
Famed billionaire George Soros lost over $1 billion after US presidential elections. As the benchmark S&P500 index rose over 6 percent, the bets Soros made went wrong due to his bearish predictions. His associated Europe’s biggest macro hedge fund, Glen Point Capital also lost over 4 percent last year. However, the main family fund managed by Soros Fund Management gained 5 percent for the year, helped by his long positions in financial and industrial businesses.
The strategy of Stanley Druckenmiller, one of Soros’s former managers who helped him earn a billion dollar when the pound collapsed in 1992, used a different strategy and was bullish. His firm Duquesne Family Office LLC managed to make returns of more than 10 percent in 2016. Druckenmiller also predicted that the euro may fall and end up reaching at parity with the US dollar.
It was also not the first time in 2016 that George Soros had lost money on wrong bets. He also lost on the British pound as Britain opted to exit the European Union, making Brexit a reality. George Soros was bearish and refrained from speculating on his positions, staying long as the pound slid to a 31 year low against the US dollar.
A Prequin report details that in 2016, private venture capital deals in the infrastructure sector surged, attributing the occurrence to the ferocious competition for roads, airports, ports and power plants. A record twelve figure dollar sum ($413bn) was spent on vested interests in world’s infrastructure assets, a fourteen percent increase when compared to the previous year.
Tom Carr, the chief at Prequin’s products department, notes that in the last decade the need for physical and organizational structures has augmented, in turn resulting in the increase of valuations. A great number of corporations have generated multibillion-pound funds in targeting low-risk acquisitions in the aforementioned field. Their optimism stems from the increasing authority support in private field investments, but Carr mentions that it is indeed uncertain whether the trend will continue moving into 2017.
A dire approach being witnessed in the sector is that of entrepreneurs channeling funds solely on projects in the post-construction stage. They seem to be opting for already build structures that will guarantee steady income flows.
China one of the leading signatories of the Paris Agreement on Climate Change signed last year is investing heavily in moving away from the traditional coal power plants that the nation relies upon for almost all of its power needs. China is going through a growing environmental issue with excess pollution levels in many of its major cities. However, it is now leading the charge in making tremendous investments of over $360 billion in renewable fuel to help ease its reliance on coal and provide a better air for its citizens.
Although investments in renewable and clean energy declined by 18 percent during the year 2016 because of sluggish Chinese economic growth, China is taking it seriously to pick up pace as the United States may look for more coal powered energy solutions after President Trump moves away from all major climate pacts that his predecessor Barack Obama had signed. Head of Asia research for Bloomberg New Energy Finance (BNEF), Justin Wu said, “China is facing slowing power demand and growing wind and solar curtailment. The government is now focused on investing in grids and reforming the power market so that the renewable in place can generate to their full potential.”
As per the 13th Five–year plan, China will invest 2.5 trillion yuan ($361 billion) into renewable power generation by 2020, helping create over 13 million jobs in the sector as per the National Energy Administration (NEA). China’s major economic planning agency, the National Development and Reform Commission (NDRC) has already said in December 2016 that over 1 trillion yuan will be spent on solar power projects through which over 1,000 solar plants would be made, while another 700 billion yuan will go towards wind farms and 500 billion to hydro-power generation. A renewable analyst with securities firm Shenyin Wanguo, Steven Han said, “The government may exceed these targets because there are more investment opportunities in the sector as costs go down.”
Saudi Arabia’s Energy Chief Khalid Al-Falih has expressed cautionary concerns on an imminent deficiency in oil supplies by 2020. While addressing a panel of journalists from CNBC, he asserted that the main reason that would result in the occurrence was the ongoing lack of investment flows. Khalid also noted that lacking situation was being caused by the current oil prices, plus a general reduction in the natural reserve resources. He further detailed that, with demand bound to rise to about 1.5 million barrels a year, there was a need for enormous vested interests in addressing the issue.
Earlier in the week, Khalid spoke of an expected oil price rebalance by June 2017 that would guarantee a surging trend in the market. He then appeared to be refute the claims while speaking to CBNC reporters at the World Economic Forum; noting that prices are yet to reach the desired “equilibrium”, even though the $100 per barrel highs remain improbable.