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Richard Drewry
Looking ahead to the second half of 2024, resource stocks will offer protection as geopolitical risks escalate and renewable energy is expected to benefit from interest rate cuts.
script
Natural Resources Update and Outlook for the Third Quarter of 2024
I think one of them The biggest development so far this year has been the awareness of geopolitical risk and how that manifests itself in terms of whether or not you need to be allocated in this space? The idea of inflation protection, leverage for global growth, and diversification has always been present in resource stocks. But I think more and more people are thinking about insurance policies against geopolitical risk. I mean, obviously the Russian invasion of Ukraine, all the conflicts going on in the Middle East and the impact that has on supply. A lot of people are realizing that they could wake up on any given day and something could It would have a huge impact on the commodity sector, the resource sector, and their overall portfolio. And this prevents that from happening.
How does this impact your portfolio strategy positioning?
We are looking more and more at security of supply situations. Geopolitical risk actually works against you in the resource space as well. For example, if you happen to be in a country, like Ukraine, that was impacted by a Russian invasion and that impacted their grain exports. So you want to make sure you are in a very secure position with their security of supply. And that also ties into the cost issue.
So we looked around the world to see where we needed to be to find a place that could provide these resources at a price and availability that would be satisfactory to everyone.
How would a potential rate cut affect the likelihood of global economic growth?
You have to think hard about the interest rates we raise and what that does to renewable energy resources. So you have to believe the opposite is going to happen. If you lower interest rates, your riskier assets are definitely going to become more valuable.
We’ve seen this happen multiple times. So if there’s some kind of decline in interest rates, and it looks like it’s coming in September or certainly in the fourth quarter, then that’s positive for the renewable energy sector. But I think it’s also positive for global economic growth, which again is the leverage that this portfolio really has.
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Notes to Editors: Summary highlights for this article were selected by Seeking Alpha editors.
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