The story in May was one of recovery. Heading into mid-May we were coming off the worst monthly performance in April since the financial crisis in October 2008. May saw major indices snap a long series of weekly losing streaks. By mid-month we had seven consecutive down weeks in a row. Such a negative weekly stretch has only occurred three times since 1950. The second half of the month saw sharp gains as major indices rebounded from an overextended sell-off.
The dominating narrative during the month was a bear market rally, and some of the sell-off starting to look overdone. Interest rate and inflation expectations have spiked since November 2020, causing a very steep multiple compression across all growth equities. There comes a point when multiple compression has to ease – and it looks like we hit this point in May.
Now – the primary concern has shifted as the market is baking in a “higher for longer” rate environment, and all eyes are on the prospects of entering a recession. This upcoming earnings period will prove critical in showing which companies are able to maintain revenue growth, and just how much inflation is squeezing the bottom line of companies. Slowing growth could mean trouble for the high multiple cohort while the market shifts focus entirely towards profitability.
When it comes to inflation, if we are reaching peaking levels of inflation, the Fed will have permission to signal a pause or ease in interest rate hiking trajectory which could alleviate pressure on growth assets. We still need more data and visibility into just how and when inflation will be peaking.
Please note that all performance figures are showing net data. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product.;
Macro Outlook
May was another month that continued to highlight the lack of buildout capacity in our global energy infrastructure. As a direct result from the Russia/Ukraine war, Oil & Gas companies continue to rally. At current WTI levels, fossil fuel companies are now becoming much more cash generative which we believe is the “last hurrah” for these types of energy companies.
When European, US, and Japanese leaders met in Brussels, they debated how far to go in shutting off Russian energy imports. Although a full ban was rejected, President Joseph Biden and European Commission President Ursula Von Der Leyen announced a deal for the US to send 15 billion cubic meters of liquefied natural gas (LNG) to the EU this year.
While Natural Gas provides a backstop as a less harmful fossil fuel, we believe this part of a staged approach in global reduction of more harmful GHGs before having the ability to completely phase out.
European governments are embracing renewables and even returning to nuclear. Belgium has backtracked on its denuclearization plan, a cornerstone of the platform of its coalition Green Party. Two reactors scheduled to be decommissioned will be kept in service for an additional 10 years. The choice "will strengthen our country's independence from fossil fuels in a turbulent geopolitical environment," Prime Minister Alexandre De Croo announced.
In early June, Solar names were higher on reports that the Biden Administration will announce a 2-year exemption on tariffs for some solar panel imports and invoke the Defence Production Act to provide support for US solar companies. This underscores the need for global trade policy to adapt throughout global supply chain constraints in order to improve unit economics, further incentivizing clean energy buildout capacity.
Please remember that when you invest in ETFs, your capital is at risk.
|
|
1M
|
3M
|
6M
|
YTD
|
12M
|
SI
|
|
HANetf S&P Global Clean Energy Select HANzero™ UCITS ETF
|
3.29%
|
-8.56%
|
-22.65%
|
-11.33%
|
NA
|
-26.15%
|
|
S&P Global Clean Energy Select
|
3.33%
|
-8.47%
|
-22.53%
|
-11.14%
|
-20.59%
|
-25.89%
|
Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Source: Bloomberg / HANetf. Data as of 31/05/2022. Please note that all performance figures show net data.
Learn more about our Clean Energy ETF