Energy stocks have recently reclaimed their position as market leaders, driven by various factors affecting the global energy landscape. Louis Navellier’s insights shed light on this resurgence, providing a comprehensive perspective on the implications for the economy and financial markets. One of the key drivers of the energy sector’s resurgence has been the substantial increase in gasoline prices. In August, gasoline prices rose by 10.5% in the Consumer Price Index (CPI) and a remarkable 20% in the Producer Price Index (PPI). This surge is primarily attributed to a sharp decline in inventory levels.
Furthermore, the energy sector has been grappling with a diesel shortage, particularly in Europe. As a result, the United States has increased its exports of distillates, which include diesel, heating oil, and jet fuel. This export surge is contributing to a reduction in the trade deficit and bolstering GDP growth.
The high gasoline prices have had political ramifications as well. The popularity of President Joe Biden is declining in the polls, partly due to the impact of elevated gasoline prices. Saudi Arabia is believed to have significant influence over crude oil prices and is seemingly attempting to undermine President Biden’s position.
Saudi Arabia’s Role in Crude Oil Prices
Candidate Joe Biden made disparaging remarks about Saudi Arabia during his election campaign, pledging to make the Saudi government an international pariah. This stance was extended to the entire Saudi Royal Family. As a result, Saudi Arabia has taken steps to keep crude oil prices elevated, potentially as a means to influence the outcome of the 2024 Presidential election.
With gasoline prices reaching $4 per gallon (and $6 per gallon in California), President Biden is facing a significant challenge in maintaining his approval ratings. Recent polls indicate that he is trailing candidate Donald Trump by nearly 10%.
Labor Unrest and EV Mandates
Labor unrest is another element affecting the energy landscape. The United Auto Workers (UAW) strike has highlighted the labor-related challenges in the industry. Workers are inclined to secure substantial financial compensation, considering the potential impact of the Biden Administration’s electric vehicle (EV) mandate on employment.
The U.S. automobile manufacturers may need to explore profit-sharing agreements as a long-term solution, given the evolving EV landscape. Additionally, as China and Mexico strengthen their positions in battery and EV production, the Big Three automakers may consider alliances with Chinese firms to remain competitive in the EV market.
Impact of Inflation and Energy on Consumers
The current economic environment has seen an increase in both food and energy inflation. This inflationary pressure has left consumers dissatisfied. However, the campaign against fossil fuels, particularly natural gas, is encountering challenges. The United States is fortunate to possess the most affordable natural gas globally, leading to the resurgence of pipeline projects as natural gas prices trend upward.
Natural gas prices are heavily influenced by weather conditions, with hot summers and cold winters favoring higher prices. The upcoming winter is anticipated to be colder in Europe and North America due to an El Niño weather pattern, which is expected to drive natural gas prices higher.
The 2024 Presidential Election
Presidential election years often contribute to a positive stock market performance as leading candidates make promises to boost consumer confidence. Joe Biden’s reelection campaign is expected to be promoted through Super Bowl advertisements. Meanwhile, candidate Donald Trump aims to reduce gasoline prices, secure the U.S. southern border, and end the war in Ukraine.
Foreign influence is anticipated to play a significant role in the 2024 Presidential election, with Saudi Arabia potentially influencing gasoline prices. Russia, too, is actively involved in the situation in Ukraine, and the United States’ support for Ukraine is under scrutiny.
Inflation and Future Earnings
The chaos and ongoing international issues are likely to keep crude oil prices high. President Biden will need to defend significant spending to fund the war in Ukraine, while concerns about disaster relief in various areas persist. The effectiveness of aid to Ukraine is also questioned, with concerns about leaks and misuse of funds.
Amidst these challenges, U.S. consumers remain discontented, but their spending continues to grow, leading to record levels of credit card debt. A strong U.S. dollar is expected to result in declining prices of imported goods, as observed in the falling prices of electric vehicles imported from China.
Investment Strategies
In light of the global economic landscape, focusing on fundamentally superior stocks remains a robust investment strategy. Refinery and energy stocks are among the recommended options, alongside AI stocks, pharmaceutical companies benefiting from the demand for weight loss medication, travel and cruising stocks, and semiconductor-related investments.
Earnings are expected to improve steadily in the coming four quarters. While a strong U.S. dollar may impact the earnings of large multinational corporations, the recommended growth stocks are expected to remain resilient. Positive analyst earnings revisions suggest the potential for significant earnings surprises.
In conclusion, while inflation is expected to continue to subside, the U.S. remains a relative oasis amidst global economic challenges. A strong offense, focusing on fundamentally strong stocks, remains the best defense for investors in this dynamic economic landscape. With the expectation of a strong finish to the year, it’s crucial to stay informed and adaptable in your investment strategy.
