July proved to be another volatile month, with the month ending on a strong note as risk assets across the board got a bid. July was the best month for the S&P500 since November 2020 as the market tried to answer the question of the sell-off, “When do we reach the period of enough is enough?”.[1] For the month, the Dow gained 6.7%, the S&P 500 gained 9.1%, and the NASDAQ rose 12.4%.[2] Despite the July rally we still have heavy losses on a YTD basis as recession, inflation, and rate hiking fears lurk in the shadows.
Many also are now debating whether this rally is more of a short squeeze + a bear market rally or we will have more of a sustained bounce, with many thinking the former rather than the latter.
The main driver of the rally was potential light at the end of the tunnel when it comes to the fed backing off on aggressive rate hikes, and the Fed meeting coming out as a bit more dovish than anticipated. [3]
The end of the month saw a stacked line-up when it came to the earnings schedule with all the megacap majors reporting in the same week. Expectations had set the bar incredibly low as recessionary fears were mounting as well as concern over the impact on lower growth rates. However, the theme over the earnings period was “better than feared” as earnings were not yet severely impacted, and guide-downs were slightly better than expected.
We also got a litany of economic readings at the end of month from GDP, Household income, spending, PCE inflation, durable goods orders and new home sales. The theme across these readings was that we are starting to see more and more “cracks in the system” as economists debate when we will go into recession, or whether we are already in one or not.[4] It seemed to be the case of “bad news is good news” where when we get weak economic readings, it may give the Fed permission to have slightly more accommodative fiscal policy.
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
We are still in an extraordinary period in history when it comes to the fragility of our energy infrastructure as geopolitical turmoil lingers on far further than expectations. With Russia strategically limiting natural gas flow through Nordstream, due to “maintenance” issues, most of Europe is finding itself in a sever energy deficit.[5] While global demand and supply issues continue in an intense tug-of-war, we did have a positive policy change come about.
After 18 months of fierce negotiations—and an all-nighter on Saturday night for good measure—the Senate passed the Inflation Reduction Act (IRA), a milestone victory for President Biden’s economic agenda.[6] The IRA brings major changes to ramp up the fight against climate change with the country’s largest ever federal investment in clean energy. [7]
The bill will provide $260 billion in tax credits for renewable energy in order to bring down the cost of solar, wind, and other clean power sources. Mr. Biden wants to slash U.S. emissions to at least 50 percent below 2005 levels by the end of this decade, which is roughly the pace scientists say the whole world must follow to limit global warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit) above preindustrial levels. [8]
The bill would affect nearly every aspect of U.S. energy production. It includes $30 billion in incentives for companies to build solar panels, wind turbines and batteries and to process critical minerals in the United States, aiming to reverse the longstanding migration of clean energy manufacturing to China and elsewhere. [9]
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1M
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3M
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6M
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YTD
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12M
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SI
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HANetf S&P Global Clean Energy Select HANzero™ UCITS ETF
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17.58%
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17.54%
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17.69%
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0.90%
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-9.20%
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-15.96%
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S&P Global Clean Energy Select
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17.83%
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17.84%
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18.14%
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1.34%
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-8.67%
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-15.48%
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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 31/07/2022. Please note that all performance figures show net data.
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