Why the small stock rotation rally was more than just a head fake
Why the small stock rotation rally was more than just a head fake
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The stunning rally in small cap stocks in the past week as larger tech giants fell has many investors scratching their heads, but it’s important for beleaguered cleantech and renewable energy stocks.
Yes, we’ve heard it might just have been short sellers covering their losses or a bursting of the AI bubble at places such as Microsoft M 0.00%↑ SFT, Nvidia NVDA 0.00%↑ and Alphabet GOOGL 0.00%↑ , and no doubt there is some truth in both of those theories. But smaller stocks, which have suffered in the latest cycle of higher interest rates, have been overdue to catch up for some time.
The stock market rally that has carried stock indexes to a succession of record highs this summer has been far too narrow to last forever, without a reset or a collapse. With interest rates set to start falling in September, the time is right for some of the smaller stocks — including clean tech — to catch up.
Despite the lagging stock prices, renewable energy capacity and usage has been surging all year. Energy stored in batteries or solar plants has helped electric grids in states such as Texas and California survive without major blackouts (Hurricane Beryl in Houston excluded) this summer.
Even in Wednesday’s rout, smaller stocks have continued to hold their own. The market is entering its worst two months of the year (August, September) shortly, and volatility is expected. But so far, the broadening of the gains to small caps is right on schedule.
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Zeus: Climate's latest attacks on New York, Houston transcend election politics
. . . . New York City’s hardened commuters absorbed a second punch from climate change in a year this week when the extreme heat wave hitting the East Coast briefly shut down transit lines to New Jersey during the evening trip home, writes David Callaway. Like those living in Houston, Las Vegas, Miami and many other cities this summer, they are experiencing a new climate reality that is breaking things and — in the cases of power outages — threatening lives. That new reality far outweighs the political mudslinging tied to climate culture wars we’re seeing in the presidential election, Callaway writes. Despite the jargon, whoever wins the White House is going to have a national climate emergency on their hands. . . .
Thursday’s subscriber insights
Fusion is hot, says Fusion Industry Association
. . . . A new report by the Fusion Industry Association says more than $900 million was directed to fusion companies, including some 25 in the U.S.
That’s significant and no doubt fusion will be a breakthrough technology if they can ever make it work at scale, and then bring it to market. But it’s not quite the carbon storage and removal industry — itself a wildcard — just yet. Fusion remains one of the moonshot (to use an old-school term) technologies scientists hope will yield an unlimited new form of clean energy.
It is one of the preferred areas of investment for billionaires, but it is suffering from all of the funding woes that many climate startups — or just startups — are facing as interest rates remain high. Still, in the race against Russia and China, the U.S. is perceived to be in the leading in fusion experimentation.
Even executives at fusion companies will tell you that with a major breakthrough, manufacturing and development could take a couple of decades at least. Perhaps another sign of peak bull market exuberance, but we remain optimistic.
Green Impact Exchange files with SEC
. . . . A group of former New York Stock Exchange executives has banded together to develop a new exchange for sustainable and environmental companies to list their stocks, claiming it can act as a dual-listing vehicle with a primary exchange to better surface their green credentials.
The Green Impact Exchange, which counts on its team Daniel Labovitz, former head of regulatory policy at the NYSE, and Charles Dolan, former floor governor, said the aim is to offer a service that will improve investor confidence in clean energy and sustainable stocks at a time when the ESG industry is beset with credibility problems and greenwashing.
Given that an SEC application may take some time, it is probably a good idea to file now at a time when many clean energy stocks and sustainable startups are suffering from lack of funding and harm from high interest rates. While the brief rotation of the last week boosted the grouping, it’s still a long way from the go-go days of 2020 and 2021.
More to come as this story develops, but the team in charge looks like they’ve been around the block in terms of global exchange and listing services.
Editor’s picks: Disaster price tags rise; plus, less plastic in the laundry room
Watch the video: NBC News’ Bill Karins details how intense weather around the country is wreaking financial havoc. The data from the weather agency shows the U.S. might be on track to match or even pass the cost of 28 individual billion-dollar weather disasters last year.
Cleaning up laundry detergent
Did you know that it’s “Plastics-Free July”? So we turn to Plastics Today for an update on laundry detergent makers who are cutting back or giving up altogether on plastic bottles and water-heavy cleaning formulas. New packaging from Tide, Tru Earth, and Arm & Hammer makes an environmental statement as plastic packaging gives way to paperboard for waterless detergent formats, according to a report from Plastics Today. Earlier this year, Procter & Gamble Co. PG 0.00%↑ introduced Tide evo fiber tiles, “a form of laundry detergent that incorporates six layers of tiny fibers into squares measuring about 2 inches by 2 inches. The concentrated-detergent tiles activate instantly in water.” Tide evo launched in Colorado, and P&G is now rolling out the product nationwide. The waterless product is the result of more than 10 years of research and development, the report says.
Latest findings: New research, studies and projects
Catastrophe risks for insurers
The authors of the Swiss Finance Institute research paper titled Who Monitors Climate Risk of Financial Institutions? Evidence From Catastrophe Risks in Insurance assess the ability of regulators and private monitors like credit rating agencies to evaluate and discipline the exposure of the insurance industry to natural catastrophe risks intensified because of climate change. According to the abstract, the research shows that in response to stricter rating requirements for natural catastrophe risks, many insurers accept downgrades and become riskier. Meanwhile, the regulatory capital requirements are not capable of curtailing their excessive risk taking. Authors: Christoph Basten, University of Zurich; Swiss Finance Institute; CESifo; and Anastasia V. Kartasheva, University of St. Gallen — I.VW-HSG, Joshua J. Harris Alternative Investment Program, Swiss Finance Institute.
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Words to live by . . . .
“When I figured out how to work my grill, it was quite a moment. I discovered that summer is a completely different experience when you know how to grill.” — Taylor Swift.