Head of Equity Strategy
Summary: In our weekly update on theme baskets performance we highlight energy storage which declined 9.7% last week driven by declines among energy storage and battery providers including German-based Varta declining 38% as the company has withdrawn its fiscal outlook due to elevated energy costs and raw materials. The best relative performer was our defence basket which was bid up due to the Russian mobilisation announcement increasing the need for more weapons to Ukraine and thus lifting the outlook for the defence industyr in the US and Europe.
Everything is in free fall
Last Monday, we wrote our first weekly update on our equity theme baskets and the last week’s performance turns out to be a continuation of what had been doing badly two weeks, namely themes such as crypto, nextgen medicine, green transformation, e.-commerce, and energy storage. Normally, we would write about the worst and the best performing theme, but in this update we will zoom in on the energy storage theme basket because last week had some dramatic moves in this basket.
Energy storage: higher energy costs complicates the transition
The green transformation has more political capital behind it than ever as the European continent is set to replace its dependence on Russian energy in the years to come. But higher primary energy costs are complicating the transition making everything in manufacturing more costly. One of the companies in the energy storage basket that is under pressure from higher energy costs is Varta announcing last week that it is withdrawing its fiscal outlook for 2022 as rising raw materials and energy costs are making the business of energy storage products unpredictable. Varta’s share price was down 38% last week. The only reason why the energy storage basket is not down more last week is because the basket contains lithium and cobalt miners which are doing well due to high prices on these two metals as supply continues to be lower than demand.
Defence: Russia’s mobilization lifts European defence stocks
Russia’s decision last week to mobilize its reserves to drastically increase its manpower in its war in Ukraine has increased the stakes in the war and also the demand for more weapons to Ukraine. Our defence basket was the best performing basket last week down only down 3.3% with the German military company Rheinmetall being the best performing up 6.9%. Analysts remain bullish on Rheinmetall with revenue set to increase from €5.7bn in 2021 to €9.7bn in 2025 as the EU is expected to significantly increase its military spending. It could very well be that the current growth estimates are too low depending on the future outcomes in the war in Ukraine.
Today we are also updating our defence basket by removing Ultra Electronics a UK-based defence and security company that has been bought by Cobham back in August. The new stock in the basket is Hensoldt which is a German military technology company which offers solutions across space, air, land, sea, security, and cyber.
AI: The good, the bad, and the bubble
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Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
