In this week’s Hypergrowth Investing Podcast, Aaron Davis and Luke Lango go over the macro-economic environment to answer the question: “Why is everyone acting like we are all on a sinking ship?”
The first half of the year was defined by inflation, while the second half is defined by the Federal Reserve. They are steadily fighting inflation; however, the overall consensus is they are going too hard against inflation. Many people think this is going to lead them to walk the economy into a recession, even though we are already technically in a recession.
We aren’t seeing much of a drop off yet in the larger economy for one crucial reason: the financial economy leads the “real” economy.
In short, the economy is going to take a big hit in the next six months. Between the labor market which is set to drop off in the coming months, low earnings projections, and an overwhelming number of bears in the market, the short-term outlook isn’t pretty.
The good news? We are close to “the bottom” in terms of price and time. We are in the final innings of this bear market and see the light at the end of the tunnel for the upcoming bull market in 2023.
But it’s all going to come down to the Fed. On the heels of global capitulation, they have been hawkish for months, but some Fed members have opened the door to a change in stance in the past week.
OPEC+, the largest oil producer in the world, announced a recession size production cut. This is the main contributor to the rise in oil prices. But there is so much demand that oil prices aren’t being pushed all the way to their previous highs like this past summer.
This spike in oil prices is telling us that demand destruction is on the horizon. But at the end of the day, oil prices are going to trend lower in the next few months.
The “bottom” is going to be confirmed by the official Fed pivot or Fed pause on hiking rates. Stocks tend to bottom because markets are forward looking.
We predict that we will hit the “real bottom” within the next three months, and then it’s off to the races for the new bull market.
On the micro-economic front, our “big three” sectors have not changed. Climate tech, robotics, and space still have great fundamentals and high growth potential.
The one upside to the absurd rise in oil prices, directly due to the OPEC+ production cut, is the pivot to clean energy sources. This means more solar panels, hydrogen facilities, more EVs on the road, and the restart of nuclear power.
Everyone is fed up with gas and energy prices that their own government doesn’t even control anymore. There is going to be a massive shift in clean energy solutions throughout North America and Europe and this is going to create massive investment opportunities in solar and hydrogen stocks but especially battery energy storage system stocks.
Automation and robotics are an especially hot topic recently, with the rollout of prototypes from Tesla (TSLA) and Amazon (AMZN). These are two of the biggest companies in the world who are all in on robots. This is huge.
Pay attention to these significant moves. The industry will accelerate rapidly over the next few years.
Automation is going to help solve the labor-shortage problems across blue-collar work forces. While white-collar firms are firing, blue-collar companies – like the retail and restaurant industry – need automation solutions. We are super bullish in this space.
What’s more, there have been a lot of successful launches into space recently and demand is very strong.
Across all of these sectors, supply chains are improving and inflation problems are being fixed. Take EVs for example. While the issues of supply chains are improving, at the same time, gas prices are going up. The cost delta between these two are growing, which is going to cause EV demand and production to rise.
The easing of supply chain issues are creating more opportunities in the clean tech, robotics and space industries and creating more demand and higher stock prices in these sectors especially.