What’s Going On Here?

Not to harp on about it or anything, but the US president called on Thursday for half of all vehicles sold in the US to be electric or plug-in hybrid by 2030 (tweet this).

What Does This Mean?

Electric vehicles (EVs) only accounted for 2% of US passenger car sales in 2020, according to Bloomberg, so this target isn’t exactly an easy one to meet. Fortunately, it’s more symbolic than legally binding, and motivated by a couple of factors: climate concerns, of course, but also the worry that the US will fall behind Europe and China in developing its EV industry – essential to any ahead-of-the-curve economy. As for the country’s carmakers, they’re happy to help, but they did point out that this ambitious target would only be achievable if the government laced their palms with silver…

Why Should I Care?

The bigger picture: Keep up or drop out.
The announcement hasn’t fundamentally changed anything for US carmakers, many of which have long since announced plans to shift focus to EVs. General Motors, for example, is planning to only sell zero-emission models by 2035, while Ford and Chrysler-parent Stellantis are expecting EVs to represent 40% of global and US sales respectively by 2030. Still, given the huge investment required and the intensifying competition from EV newcomers, only time will tell if the traditional players can actually make a decent return on their investment.

For you personally: Think laterally.
There are ways other than carmakers to invest in EVs – like, say, the companies that are building and operating charging stations. They’ve already installed more than 100,000 in the US, and, according to the Zero Emission Transportation Association, 4.4 million more will be needed if the US is going to transition to all-electric vehicle sales.

Which Stocks Will Be Caught In The Next “Taper Tantrum”?

What’s Going On Here?

You might remember the last “taper tantrum” back in 2013, when the Federal Reserve (the Fed) simply hinted at slowing down its bond-buying.

Well, odds are there’s one on the horizon in the next couple of months.

Economists, after all, are expecting the Fed to drop a similar hint next month, and – even though nothing will actually change until next year – markets will react immediately.

Here’s the good news: history can tell us which industries and companies are likely to be hit hardest, and which tend to come away unscathed.

So that’s today’s Insight: how to adjust your portfolio so you’re primed and ready for the Fed’s next update.

Groundwork

What’s Going On Here?

The Bank of England (BoE) laid the foundations for a slow and steady return to more normal interest rates at its latest meeting on Thursday.

What Does This Mean?

The BoE left its interest rates and bond-buying program where they were, but it did make a change to its inflation forecast: the central bank now sees inflation topping out at around 4% in late 2021, up from 2.5% now. That would represent the fastest price rise in a decade, and twice the BoE’s target.

So to head off the threat of runaway prices, the BoE warned investors to expect some “modest tightening” of the policies it’s had in place since the pandemic first laid foot on UK soil. It’s all relative, though: the BoE thinks it’ll be another three years before interest rates hit 0.5%.

Why Should I Care?

For markets: Why so negative?
Plenty of central banks are starting to hint at higher interest rates to come, but bond investors seem determined to ignore them for now. See, yields have been tumbling since spring, which has pushed the global value of negative-yielding debt to nearly $17 trillion. That’s up from $12 trillion in May, which suggests one of two things: either investors have still been flocking to the safety of bonds because they don’t think economies are really on the mend, or central banks’ have been so gung-ho with their bond-buying that they’ve pushed everyone else out of the market. That would make it a lot harder to use bond yields as a proxy for investors’ economic expectations.

The bigger picture: Stock investors say relax.
Stock valuations are more likely to hold up if bond yields stay low, and the recent set of better-than-expected US company earnings should help prop up prices too. Goldman Sachs certainly seems to think so: the investment bank cited both those reasons when it lifted its end-of-year target for the US stock market by 9% on Thursday.

You might also like: Goldman’s not the only one that thinks the only way is up.

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