Investment

2022 caution signs include inflation, China and stubborn Covid – Investment Executive

Published

3 years ago

January 11, 2022

Lingering Covid concerns could disrupt business well into 2022, says Michael Arno, an associate portfolio manager and senior research analyst with Brandywine Global Investment Management.

Arno said that while the omicron variant has proven less severe than delta, its quick spread poses an ongoing threat to global manufacturing and logistics, especially given China’s zero-tolerance policy to Covid exposure.

“If we see a wave of cases followed by closures at plants and ports, we’re going to continue seeing supply chain issues,” he said.

Covid-related hardships have also pushed millions of people around the world further into poverty, Arno said, creating new market risks with a swing to the political left in some emerging countries, particularly in Latin America.

Chile is going through a constitutional rewrite following the election of its new left-leaning president Gabriel Boric, and social spending is expected to increase. In Brazil, leftist former president Luiz Inácio Lula da Silva has a dominant lead in the current election campaign. And in Colombia, the former left-wing mayor of Bogota, Gustavo Petro, has emerged as the front-runner in polls for the May 2022 national election.

“So [there’s] definitely some pressure on spending and a shift to the left in a number of places around the world,” Arno said.

Arno discussed market risks on the latest episode of the Soundbites podcast, sharing the microphone with Jennifer O’Hara Martin, portfolio specialist with T. Rowe Price.

Martin agreed that vaccine effectiveness and government responses to Covid concerns will continue to shape the investing landscape through 2022.

“The global pandemic has created near-term distortions in the market, but this has also created opportunities for long-term investors to invest in high-quality companies that are trading at a discount,” Martin said.

She described Covid as a high-impact event that has driven environmental, social and governance initiatives by demonstrating how intertwined economic outcomes are with the prosperity of the planet.

“Companies that understand these connections are often the innovators that are positioning themselves for real and future growth,” she said. “We believe this is a very good disruption that we seek to be on the right side of.”

In addition to Covid-related challenges, Arno and Martin said uncertainty about China’s fiscal policy will undoubtedly affect markets in 2022.

“We saw a credit impulse drag for ’21. That has knock-on effects for countries around the world,” Arno said. “Seeing their change in policy in ’22 could offset some of the tightening that we’re seeing in developed markets from the central banks; however, it depends on the degree of fiscal stimulus they take.”

Martin described the evolving relationship between the U.S. and China as a struggle between two superpowers that is creating complex dynamics for multinational corporations.

“It’s become very clear that underlying tensions between these two nations are real, structural and unlikely to be resolved with ease,” she said. “So, this is an area that we continue to monitor for both risk and opportunities.”

Martin maintained, however, that market uncertainty is neither new nor particularly worrisome.

“As we approach 2022, we must maintain a healthy level of caution while also really keeping our eyes open to the opportunities that present themselves,” she said. “As global investors we remain prudent, and we must maintain some balance and stay true to the framework while also acknowledging and being aware of our blind spots.”

This article is part of the Soundbites program, sponsored by Canada Life. The article was written without sponsor input.

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

3 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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