The new year is just getting started but there is a pretty clear theme on financial markets. According to Bank of America, “inflation assets are outperforming deflation assets by the most since 2006.â€
Bank of America says inflation assets include commodities GSG , real estate, Treasury inflation-protected securities, U.S. banks and value stocks. Deflation assets include government bonds TNX , corporate bonds, the S&P 500 SPX and growth stocks.
Investors have been pouring their money into the “inflation trade.†Last week we saw the second largest inflow to energy stocks, the third largest inflow to Treasury inflation protected securities, sixth largest inflow to emerging markets, and the largest inflows to bank loans in nearly four years, according to the Bank of America data. Municipal bonds, which are exempt from federal and most state taxes, saw record inflows as well. Although I may not agree with running into some of these assets investors are running into, like the treasury inflation securities. Reason being, is that the way governments gauge inflation if highly undermining how much inflation is going on. But for the sake of this post I’m mainly highlighting the influx of capital to energy sector.
The renewable power capacity worldwide will increase to a record 200 GW (gigawatt this unit is used for power plants or power grids) this year from forecasts of the international energy agencies renewables 2020. The increase, representing almost a 90% of total expansion in overall power capacity globally, is led by hydropower, wind and solar PV. Wind and solar additions, in particular, will jump by 30% in both the USA and China as developers rush to take advantage of expiring incentives.
Now, with knowing this knowledge as an investor how can I make this benefit me? Well, something I always talk about is A symmetrical investments but in order to partake in A symmetrical investment opportunities you need asymmetrical information. By knowing this forecast by many analysts but also by being observant to where the world is going the trend of clear we are moving to a greener energy environment.