TL;DR
- CPI slowly continues to fall with the latest annual figures hitting 4.9%, down from 5% last month
- We could see that number drop closer to 3% in the next two months, if the current monthly trend stays consistent
- Renewable energy topics are trending at the moment, despite a challenging economy putting pressure on new green investments
- Top weekly and monthly trades
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Major events that could affect your portfolio
Eyes and ears are always peeled for the latest inflation data at the moment. This month was no different, but the result was a little, well, boring. The headline CPI figure came in right on expectations, coming in at 4.9% on an annualized basis.
That’s down a whopping 0.1% from the 5% figure in March. So it’s a good thing, but at that rate the Fed won’t get inflation down into their target range of 2-3% until late 2024. That’s not ideal.
With that said, it’s important to remember that the annualized figure takes into account the results from the past 12 months. That might seem obvious, but it means that we can gain some insight as to what the next inflation figures might be, based on the result from last year that’s due to drop from the calculation.
It’s why we may see the annualized figure drop significantly over the next two months.
The inflation figure for last May was 0.9% and June hit 1.2%. That’s 2.1% in price rises over just two months. Compare that to the average inflation rate of the last three months of 0.3%, and we could see those high numbers replaced by much smaller ones, dropping the annualized headline rate substantially.
To put a specific number on it, if the average stays at 0.3% over the next two months, the headline figure would drop to 3.4%. That’s within spitting distance of the Fed’s target range, and would have big knock on effects to both Fed and corporate policy.
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With energy prices spiking, renewable energy sources are in an interesting spot. On one hand, consumers would be forgiven for being more worried about how they’re going to be able to afford their bill, rather than where the source of the energy came from.
On the other hand, a more diversified energy grid and lower reliance on fossil fuels could bring the overall cost of power down in the long run.
And this week we’ve seen a surprisingly high level of trending interest in a range of renewable energy and green tech topics. Lithium stocks have been of interest to investors, as has news that the Bill Gates-backed TerraPower will be building what they’re calling “the world’s safest nuclear power station” in Wyoming.
There’s also been renewed interest in battery technology as electric vehicle (EV) uptake continues to grow, with researchers looking for solutions for the various challenges of wide scale adoption. One example is the attention being turned towards sodium ion batteries, which provide lower range than the current standard lithium ion, but with cheaper manufacturing costs and safer transportation in return.
Long story short – for investors, there is still a ton of research and innovation happening in the green technology space, and it would be short sighted to see the current lull in the economy as a reason why this long term trend will change.
This week’s top theme from Q.ai
And so, of course, we’ve got a Kit for that. But investing in a “green” or “ethical” way is more complicated than it seems. And that’s because every investor has a different set of values and ethics, making it almost impossible to perfectly match an investment to an individual’s personal philosophy.
For example, some investors believe in not investing in oil companies at all. Others believe in the role of an activist investor, and prefer to invest in oil companies who are putting the most resources towards alternative energy.
Some investors feel very positive about the future of electric vehicles, while others are concerned about the mining practices for lithium and cobalt, key components for the batteries that power them.
Like a bad Netflix romcom, it’s complicated.
So we’ve aimed to un-complicate it by creating the Clean Tech Kit which, like all our Kits, uses the power of AI to invest in a specific theme. In this case, it’s technology with a focus on sectors like alternative fuels and renewable energy, as well as recycling, waste-water management and smart grid-technology.
To be clear, we don’t class this as a full ESG investment portfolio, but it does invest in cutting-edge companies that are using technology with the aim to create a cleaner, greener planet.
Because while the issues of the economy are looming front of mind, it’s clear that a clean energy future is still an important issue for many investors.
Top trade ideas
Here are some of the best ideas our AI systems are recommending for the next week and month.
CVB Financial Corp (CVBF) – The Citizens Bank Holding Company is a Top Buy for next month with an B rating in Quality Value, Low Momentum Volatility and Growth. Revenue was up 18.2% in the 12 months to the end of March.
Cuentas Inc (CUEN) – The financial technology company is our Top Short for next month with our AI rating them an F in Quality Value and Low Momentum Volatility. Earnings per share was -$11.81 in 2022.
Our AI’s Top ETF trades for the next month are to invest in Brazilian small caps, Chilean stocks and the VIX and to short US mid-caps and small-caps. Top Buys are the iShares MSCI Chile ETF, the VanEck Brazil Small-Cap ETF and the ProShares VIX Short-Term Futures ETF and the Top Shorts are the iShares Core S&P Mid-Cap ETF and the Vanguard Small-Cap ETF.
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