Brian Sullivan’s outlook for the new year

The crystal ball is cloudy this yr my associates. Previously it was simpler to give you my annual record of predictions, even when it seems I used to be mistaken. Heading into 2024, nonetheless, is proving more difficult when occupied with what may occur in markets, economies and enterprise. 

Coming off a splendidly stunning inventory market international increase of 2023, this yr 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 yr.  And, like up to now 10 or so years we have been doing this, keep in mind these should not actionable funding recommendation, however slightly concepts and ideas to stoke debate and dialogue.

(To see how I did on my 2023 predictions, you possibly can click on right here.)

Whereas traditionally there can be 5 concepts, this yr we’re going “4 for ’24.”  

First, we may additionally make the prediction there can be bankruptcies amongst some wind, photo voltaic or battery shares. It’s possible 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 yr tough on many buyers within the “business of the longer term.” 

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 wrestle with excessive prices and environmental resistance, however photo voltaic is a distinct story.  Photo voltaic may quickly surpass coal as a supply of worldwide electrical energy technology. Utility-scale photo voltaic tasks are rising all over the world, and Wall Road agency T.D. Cowen says deal with corporations with these varieties of large tasks.  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 value goal of practically 30 analysts masking First Photo voltaic is $231.56, based on FactSet, greater than 30% above the present value. There may be an excessive amount of cash chasing photo voltaic tasks, somebody has to win.  Decide your photo voltaic spots.

The place I may very well be mistaken: Rates of interest transfer the mistaken method.  Already sluggish authorities allowing course of will get even worse, hurting new tasks.  Traders hand over on ‘new’ power.  Political backlash if the previous man wins again the White Home.

“Brazil is the nation of the longer term.   At all times has been, all the time can be.”

So goes the outdated ‘joke’ about Brazil investing. That it is all the time 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 under 7%. Excessive for us, however down from practically 14% earlier than the pandemic. Brazil can also be a giant wager on commodities.  It is an enormous producer of soybeans, iron ore, espresso, sugar and extra.  The large story nonetheless is oil.  Brazil is quietly changing 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 mistaken: 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 gasoline. 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 have been final yr as nicely and the bulls received overwhelmed up a bit. 

This is the considering for 2024: international oil demand goes to develop, however given China’s rolling financial ache it might enhance by lower than some anticipate. 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 presumably hitting 4 million barrels per day within the close to future (see: prediction #3). 

Russia stays strong on international markets regardless of sanctions, and OPEC could have executed most of what it could actually to maintain its member and allies manufacturing ranges decrease to stability out international markets.  There may be additionally a probably 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 gasoline, and Citigroup notes that China is prone to turn into extra of an area oil producer to assist it on nationwide safety grounds. 

The place I may very well be mistaken: The Center East scenario will get worse, OPEC+ or Saudi Arabia additional minimize manufacturing to prop up costs, international demand abruptly booms.

2023 was the yr the mega cap shares flexed. They have been large and received greater, with the so-called “Magnificent 7” (hate the identify) main the way in which. These elites of Wall Road could carry out once more, however there are many different nice corporations on the market.  Little question some are severely unloved small cap shares.  This yr will hopefully be the yr issues broaden out and buyers come again to the remainder of the market. 

All runs finally finish and new cash must go someplace.

The place I may very well be mistaken: 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. financial system additionally would hit the smaller cap shares tougher.

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