Preparing for a Year of Global Uncertainty
A mixed day... So calm it's uneasy... Preparing for a year of global uncertainty... Buckle up for volatility... Don't overlook commodities... The case for higher oil prices... A refuge from the storms...
Onward...
Today didn't quite look like a full-fledged resumption of "bull season," but it wasn't all that troubling of a performance in the markets, either...
The major U.S. indexes finished mixed, with the S&P 500 down slightly. Bond yields remained steady, with the 10-year Treasury continuing to hover near 4%.
The headline economic notes of the day were some shoulder-shrugging news about jobs.
Another report this morning, from payroll processor ADP, showed that private-sector jobs in the U.S. grew by 164,000 in December, above Wall Street expectations. Plus, initial jobless claims – new people seeking unemployment benefits – fell to a two-month low in the final week of 2023, according to the U.S. Department of Labor.
All in all, the labor market isn't cratering, but it's continuing what appears to be a gradual weakening. Investors will next digest the monthly "nonfarm payroll" report for December, with an updated unemployment rate, tomorrow morning.
The relative calm today, though, is somehow uneasy...
I (Corey McLaughlin) mentioned earlier this week that one of the things on the top of my mind at the start of 2024 is November's presidential election – and what influence everything about it might have on the markets. I'm not the only one...
As our colleague Whitney Tilson wrote in his free daily newsletter yesterday, the 2024 election was the most frequently cited worry among Investopedia readers in a recent poll... ahead of war in the Middle East, a recession, inflation, interest rates, or anything else.
Incidentally, Stansberry Research senior analyst Alan Gula covered the subject of the upcoming election at length in the latest editions of our Portfolio Solutions products, released Tuesday. If you're a Portfolio Solutions subscriber or Stansberry Alliance member, you ought to check it out.
Among other things, Alan analyzed how the present economy and/or folks' perception of it could sway election results in November, and vice versa. And he talked about why politics might play a larger role in the markets as the year goes on. As Alan wrote...
The bond market has been focused on continued disinflation and the prospect of Fed rate cuts. And as my colleague Matt Weinschenk illustrated in the monthly briefing [which we touched on in the Digest yesterday], the stock market just had a fantastic year, with a sharp move higher in the past two months.
However, at some point, the U.S. financial markets may start to appreciate the risk of a disorderly or ambiguous political outcome and a further fraying of our nation's social fabric. That could spell volatility and potentially sharp declines in the stock market. This is yet another reason why we're staying cautious for 2024.
Again, subscribers and Stansberry Alliance members can find links to the latest updates of our Portfolio Solutions strategies in your inbox or on our website. And we'll be keeping an eye on political developments this year. There won't be any shortage.
And looking abroad...
Two wars with global economic implications are already ongoing.
Of late, terror attacks have been happening nearly every day in the Middle East that threaten to escalate tensions between interested nations. This could reverse the progress made in curtailing inflation, which would influence central bank interest-rate policy... and expectations for stocks and other risk assets.
As I detailed on Tuesday and touched on yesterday, spiking shipping rates related to attacks on commercial ships in the Red Sea are a reality. So, too, is uncertainty around global energy supply and demand.
After spiking by more than 3% yesterday, oil prices have been down slightly in the past 24 hours, back in trend with a 20% sell-off since the end of September.
As Stansberry Research analysts Brian Tycangco and Bill McGilton wrote in the latest issue of our Commodity Supercycles advisory, published last night...
Brent crude (the international standard) is trading around $76 per barrel today. That's sharply lower from the almost $97 per barrel it was trading at toward the end of September.
The sell-off reflects worries about a slowing economy in the U.S. and China. While the pandemic is behind China and the country's economy is rapidly springing back to its former self, both countries are seeing less energy demand in the fourth quarter than previously forecast.
What's next? Recession? Stagnation? Another war? Something else? Nobody has a crystal ball, of course, but you can prepare for the possible outcomes...
Seeking gains in a year of global uncertainty...
Most investors tend to focus on stocks. And our team is always searching for opportunities to buy shares in high-quality businesses at good prices.
Fewer folks are interested in bonds, and especially the kind of corporate bonds our colleague Mike DiBiase follows in Stansberry's Credit Opportunities. When panic grips the market, these bonds go on sale.
When times are calm, we also typically see even less talk about commodities. But these assets and the businesses and stocks associated with them, like energy companies, might be worth familiarizing yourself with or revisiting as we look ahead at a year of global uncertainty.
First of all, they touch almost every business in one way or another – and can provide tremendous opportunities for profits if you're familiar with trends many other people overlook. As Brian and Bill explained in the latest issue of Commodity Supercycles...
Our portfolio touches on nearly every part of the energy sector. Whether it's oil and gas production, selling the "picks and shovels" to these energy companies, or renewable energy... we're prepared to profit from a host of trends in the sector.
Second, as we've seen lately, uncertainty can be good for these businesses as questions emerge about global supply and supply chains.
The case for higher oil prices...
Plus, Brian and Bill expect energy prices are likely to rise again this year and beyond. As they wrote...
In 2024, the U.S. Department of Energy ("DOE") forecasts oil demand to grow 1.3% to more than 102 million barrels per day ("bpd"). But it only expects production to increase by 0.6%. In other words, demand growth will outstrip supply growth.
Over the longer term, oil cartel OPEC expects oil demand to reach 110 million bpd by 2028 and 116 million bpd by 2045 based on strong demand from developing countries. And that takes growing renewable-energy demand into account.
OPEC estimates it will take $14 trillion in investment between now and 2045 to meet demand targets.
Meanwhile, supply pressure continues in the near term with production cuts from Saudi Arabia and OPEC+ that we have no doubt will continue into 2024.
In the issue, Brian and Bill went on to cover everything from the U.S. oil and gas producers, big and small, that are primed to keep rewarding shareholders... to their favorite European energy-infrastructure stock... a coal business... the latest trends in nuclear energy... and an update about gold, too...
If you're interested at all in what has been going on with commodities lately and where things could go, the latest issue of Commodity Supercycles is a must-read. Existing subscribers and Stansberry Alliance members can find it here.
Finally, don't miss our 'emergency briefing'...
Without giving too much away, this broadcast touches on another sector worth considering today – for a multitude of reasons. An analyst who has recommended more 10X winners than anyone else in our company's history says several potential catalysts are converging right now...
He has rushed to put together a free emergency briefing to get all the information out before what he calls perhaps the most lucrative money-making opportunity of 2024 passes by. It's a chance to make incredible gains no matter what else is happening in the world... a refuge from the storm of inflation, war, energy prices, and the overall economy. Click here for all the details now.
And one important note for Stansberry Alliance members: You are welcome to watch this free broadcast, but you can also find all the details about this opportunity and how to take advantage of it in your inbox.
New 52-week highs (as of 1/3/24): Cencora (COR) and Phillips 66 (PSX).
In today's mailbag, feedback on yesterday's Digest, which included commentary on airline-related "Fed speak"... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Memo to Richmond Fed President Thomas Barkin: If you're 'heading to the wrong airport', maybe you shouldn't be flying the plane." – Subscriber William S.
All the best,
Corey McLaughlin
Baltimore, Maryland
January 4, 2024