Dear readers,
Welcome back to our newsletter, it's been a while but we promise to get back to posting weekly newsletters about economic conditions and invest strategies in the near future.
Today we wanted to give you our thoughts on what 2023 has in store for us and what we believe are the best sectors to invest in.
Recap
As you probably can tell when you are buying groceries, inflation is still too high around the world. The Federal Reserve (Central Bank of America) is now raising interest rates to cool off a booming economy to fight inflation.
Basically what the Federal Reserve is doing is making access to credit harder for consumers and companies. This causes consumers to spend less and when ones spending is lower, so does another’s income. This cycle will continue until the whole economy starts to contract. This is what we call a recession.
In the graph above you can see that the current tightening cycle vs prior cycles. As you can probably tell the current cycle is the fastest and this tightening cycle will have huge impact on the economy in the coming months. The only important question is how big the impact will have on the economy and how to benefit from all the fear in the current stock market.
The mission of the Federal Reserve is to reduce inflation without causing a recession. While many investors are sceptical if they can achieve that goal, we believe it can happen if inflation has really peaked and is coming down substantially in the coming months. Only then we believe that the market has reached a bottom.
Investment Ideas
While investing in a higher interest rate environment is a little more difficult, if inflation has peaked, we believe it is possible to have great returns in these sectors:
Battery Stocks
The global energy crisis has awakened most countries to invest in durable energy sources. The only problem they have is how to store ‘green’ energy for like, evening consumption, and the solution will be batteries. There are many companies working on new solid-state lithium batteries which can store much more energy than the traditional lithium batteries. Worth checking out.
EV Stocks
A follow-up on battery stocks is of course the EV sector. Combustion engines are going away in the next couple of decades and it is wise to invest in EV companies when the market has so much fear about an upcoming recession. As long as you have a long-term investment approach, we believe EV stocks are a great investment at the moment of writing this newsletter.
Nuclear Power
Poland, The Netherlands, Japan and other countries are backing nuclear power plants again as a reliable energy source. Now that Europe has to be independent again with its energy sources, we believe the nuclear power sector is a great investment in the coming years. Begin next year the EU will have given the Nuclear Power sector a green label, this will encourage more countries to build reactors.
Green Energy Stocks
Solar companies like Enphase and SolarEdge are going through the roof (almost literally) because of the huge demand they have. The middle class want solar panels as fast as possible to reduce their monthly energy costs. This is also a great sector you can invest in for the coming decades.
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