Brian Sullivan’s outlook for the new year

The crystal ball is cloudy this 12 months my buddies. Previously it was simpler to give you my annual checklist of predictions, even when it seems I used to be unsuitable. Heading into 2024, nevertheless, is proving more difficult when eager about what may occur in markets, economies and enterprise. 

Coming off a splendidly stunning inventory market international increase of 2023, this 12 months may very well be anyone’s guess. Oh, and I am instructed there’s an election occurring in November which may additionally muddle the market waters much more.  

However as our tagline for “Final Name” goes, we have got to stomach up or buckle up and step up with some ideas on the brand new 12 months.  And, like up to now 10 or so years we have been doing this, bear in mind these will not be actionable funding recommendation, however quite concepts and ideas to stoke debate and dialogue.

(To see how I did on my 2023 predictions, you’ll be able to click on right here.)

Whereas traditionally there could be 5 concepts, this 12 months we’re going “4 for ’24.”  

First, we may additionally make the prediction there shall be bankruptcies amongst some wind, photo voltaic or battery shares. It’s probably given stability sheets full of leverage, still-high rates of interest and demand in some markets that’s merely nonetheless not there. It was a 12 months tough on many traders within the “business of the long run.” 

SolarEdge was down 67% and large NextEra Power Companions misplaced a 3rd of its market worth. The Invesco Photo voltaic ETF (TAN) was down 30%. 

It was painful. Wind energy corporations could battle with excessive prices and environmental resistance, however photo voltaic is a unique story.  Photo voltaic may quickly surpass coal as a supply of worldwide electrical energy era. Utility-scale photo voltaic initiatives are rising world wide, and Wall Avenue agency T.D. Cowen says give attention to corporations with these varieties of huge initiatives.  Particularly the agency likes First Photo voltaic (FSLR), naming it as a high choose in 2024. They don’t seem to be alone. The median worth goal of practically 30 analysts masking First Photo voltaic is $231.56, in response to FactSet, greater than 30% above the present worth. There’s an excessive amount of cash chasing photo voltaic initiatives, somebody has to win.  Decide your photo voltaic spots.

The place I may very well be unsuitable: Rates of interest transfer the unsuitable means.  Already sluggish authorities allowing course of will get even worse, hurting new initiatives.  Traders surrender on ‘new’ vitality.  Political backlash if the previous man wins again the White Home.

“Brazil is the nation of the long run.   All the time has been, at all times shall be.”

So goes the previous ‘joke’ about Brazil investing. That it is at all times a rustic that nearly will get there after which falls aside. I feel Brazil is on an actual upswing and shares will profit and even outperform the U.S. market.

Unemployment is beneath 7%. Excessive for us, however down from practically 14% earlier than the pandemic. Brazil can also be an enormous wager on commodities.  It is an enormous producer of soybeans, iron ore, espresso, sugar and extra.  The large story nevertheless is oil.  Brazil is quietly turning into an oil superpower, pumping out greater than 3.5 million barrels of oil per day and headed towards 4 million.  Watch the iShares MSCI Brazil (EWZ) ETF as a proxy.

The place I may very well be unsuitable: If the U.S. greenback pops, it may sink the commodities story. Or if oil costs plunge.  Brazil additionally had an excellent 2023, so one wonders if all of the market juice has been squeezed. 

Sure, I imply decrease… for each oil and fuel. Or maybe they finish flat at greatest.  This may occasionally appear stunning given that almost all of the calls on the market appear to be bullish. However they had been final 12 months as properly and the bulls acquired overwhelmed up a bit. 

Here is the considering for 2024: international oil demand goes to develop, however given China’s rolling financial ache it might improve by lower than some count on. Within the meantime, international oil provides are plentiful.  Manufacturing right here is over 13 million barrels per day and Brazil and Guyana have gotten rising stars in oil drilling, with Brazil probably hitting 4 million barrels per day within the close to future (see: prediction #3). 

Russia stays sturdy on international markets regardless of sanctions, and OPEC could have achieved most of what it could actually to maintain its member and allies manufacturing ranges decrease to stability out international markets.  There’s additionally a doubtlessly new growth round China, and that’s that the nation could attempt to develop it is personal shale oil output.  China imports and ton of oil and pure fuel, and Citigroup notes that China is prone to change into extra of a neighborhood oil producer to assist it on nationwide safety grounds. 

The place I may very well be unsuitable: The Center East scenario will get worse, OPEC+ or Saudi Arabia additional lower manufacturing to prop up costs, international demand out of the blue booms.

2023 was the 12 months the mega cap shares flexed. They had been huge and acquired greater, with the so-called “Magnificent 7” (hate the title) main the best way. These elites of Wall Avenue could carry out once more, however there are many different nice corporations on the market.  Little doubt some are severely unloved small cap shares.  This 12 months will hopefully be the 12 months issues broaden out and traders come again to the remainder of the market. 

All runs ultimately finish and new cash must go someplace.

The place I may very well be unsuitable: Traders may care much less about valuation and simply proceed to purchase the ‘Magazine 7’ and different monster cap shares.  A slowdown within the U.S. economic system additionally would hit the smaller cap shares tougher.

(Watch Brian Sullivan on CNBC’s “Final Name” Monday via Friday at 7 p.m.)