Brian Sullivan’s outlook for the new year

The crystal ball is cloudy this 12 months my pals. Prior to now it was simpler to provide you with my annual listing of predictions, even when it seems I used to be mistaken. Heading into 2024, nonetheless, is proving tougher when fascinated about what would possibly occur in markets, economies and enterprise. 

Coming off a splendidly shocking inventory market international increase of 2023, this 12 months could possibly be anyone’s guess. Oh, and I am advised there’s an election taking place 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 12 months.  And, like prior to now 10 or so years we have been doing this, bear in mind these usually are not actionable funding recommendation, however relatively concepts and ideas to stoke debate and dialogue.

(To see how I did on my 2023 predictions, you’ll be able to click on right here.)

Whereas traditionally there can be 5 concepts, this 12 months we’re going “4 for ’24.”  

First, we may additionally make the prediction there will likely be bankruptcies amongst some wind, photo voltaic or battery shares. It’s probably given steadiness sheets filled with leverage, still-high rates of interest and demand in some markets that’s merely nonetheless not there. It was a 12 months tough on many buyers within the “business of the long run.” 

SolarEdge was down 67% and large NextEra Vitality Companions misplaced a 3rd of its market worth. The Invesco Photo voltaic ETF (TAN) was down 30%. 

It was painful. Wind energy firms might battle with excessive prices and environmental resistance, however photo voltaic is a unique 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 give attention to firms 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 worth goal of practically 30 analysts protecting First Photo voltaic is $231.56, in keeping with FactSet, greater than 30% above the present worth. There’s an excessive amount of cash chasing photo voltaic tasks, somebody has to win.  Decide your photo voltaic spots.

The place I could possibly be mistaken: Rates of interest transfer the mistaken manner.  Already sluggish authorities allowing course of will get even worse, hurting new tasks.  Traders surrender on ‘new’ vitality.  Political backlash if the previous man wins again the White Home.

“Brazil is the nation of the long run.   At all times has been, at all times will likely be.”

So goes the outdated ‘joke’ about Brazil investing. That it is at all times a rustic that virtually will get there after which falls aside. I believe 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 an enormous wager on commodities.  It is an enormous producer of soybeans, iron ore, espresso, sugar and extra.  The massive story nonetheless is oil.  Brazil is quietly turning 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 could possibly 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 fuel. Or maybe they finish flat at greatest.  This will appear shocking given that almost all of the calls on the market appear to be bullish. However they have been final 12 months as nicely and the bulls acquired crushed up a bit. 

This is the pondering for 2024: international oil demand goes to develop, however given China’s rolling financial ache it could improve by lower than some count on. 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 sturdy on international markets regardless of sanctions, and OPEC might have completed most of what it may to maintain its member and allies manufacturing ranges decrease to steadiness out international markets.  There’s additionally a doubtlessly new improvement round China, and that’s that the nation might attempt to develop it is personal shale oil output.  China imports and ton of oil and pure fuel, and Citigroup notes that China is prone to change into extra of an area oil producer to assist it on nationwide safety grounds. 

The place I could possibly be mistaken: The Center East state of affairs will get worse, OPEC+ or Saudi Arabia additional lower manufacturing to prop up costs, international demand abruptly booms.

2023 was the 12 months the mega cap shares flexed. They have been large and acquired greater, with the so-called “Magnificent 7” (hate the title) main the best way. These elites of Wall Road might carry out once more, however there are many different nice firms on the market.  Little question some are severely unloved small cap shares.  This 12 months will hopefully be the 12 months issues broaden out and buyers come again to the remainder of the market. 

All runs ultimately finish and new cash must go someplace.

The place I could possibly 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 via Friday at 7 p.m.)