Oil plunge, tech collapse and Fed cuts? Strategist shares possible 2023 market ‘surprises’
A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, August 29, 2022.
Brendan McDermid | Reuters
After a tumultuous year for financial markets, Standard Chartered outlined a number of potential surprises for 2023 that it says are being “underpriced” by the market.
Eric Robertson, the bank’s head of research and chief strategist, said outsized market moves are likely to continue next year, even if risks decline and sentiment improves. He warned investors to prepare for “another year of shaken nerves and rattled brains.”
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The biggest surprise of all, according to Robertson, would be a return to “more benign economic and financial-market conditions,” with consensus pointing to a global recession and further turbulence across asset classes next year.
As such, he named eight potential market surprises that have a “non-zero probability” of occurring in 2023, which fall “materially outside of the market consensus” or the bank’s own baseline views, but are “underpriced by the markets.”
Collapsing oil prices
Oil prices surged over the first half of 2022 as a result of persistent supply blockages and Russia’s invasion of Ukraine, and have remained volatile throughout the remainder of the year. They declined 35% between June 14 and Nov. 28, with output cuts from OPEC+ and hopes for an economic resurgence in China preventing the slide from accelerating further.
However, Robertson suggested that a deeper-than-expected global recession, including a delayed Chinese recovery on the back of an unexpected surge in Covid-19 cases, could lead to a “significant collapse in oil demand” across even previously resilient economies in 2023.
Should a resolution of the Russia-Ukraine conflict occur, this would remove the “war-related risk premia” — the additional rate of return investors can expect for taking more risk — from oil, causing prices to lose around 50% of their value in the first half of 2023, according to Robertson’s list of “potential surprises.”
“With oil prices falling quickly, Russia is unable to fund its military activities beyond Q1-2023 and agrees to a ceasefire. Although peace negotiations are protracted, the end of the war causes the risk premium that had supported energy prices to disappear completely,” Robertson speculated.
“Risk related to military conflict had helped to keep front contract prices elevated relative to deferred contracts, but the decline in risk premia and the end of the war see the oil curve invert in Q1-2023.”
In this potential scenario, the collapse in oil prices would take international benchmark Brent crude from its current level of around $79 per barrel to just $40 per barrel, its lowest point since the peak of the pandemic.
Fed cuts by 200 basis points
The main central bank story of 2022 was the U.S. Federal Reserve’s underestimation of rising prices, and Chairman Jerome Powell’s mea culpa that inflation was not, in fact, “transitory.”
The Fed has subsequently hiked its short-term borrowing rate from a target range of 0.25%-0.5% at the start of the year to 3.75%-4% in November, with a further increase expected at its December meeting. The market is pricing an eventual peak of around 5%.
Robertson said a potential risk for next year is that the Federal Open Market Committee now underestimates the economic damage inflicted by 2023’s massive interest rate hikes.
Should the U.S. economy fall into a deep recession in the first half of the year, the central bank may be forced to cut rates by up to 200 basis points, according to Robertson’s list of “potential surprises.”
“The narrative in 2023 quickly shifts as the cracks in the foundation spread from the most highly leveraged sectors of the economy to even the most stable,” he added.
“The message from the FOMC also shifts rapidly from the need to keep monetary conditions restrictive for an extended period to the need to provide liquidity to avoid a major hard landing.”
Tech stocks fall even further
Growth-oriented technology stocks took a hammering over the course of 2022 as the steep rise in interest rates increased the cost of capital.
But Standard Chartered says the sector could have even further to fall in 2023.
The Nasdaq 100 closed Monday down more than 29% since the start of the year, though a 15% rally between Oct. 13 and Dec. 1 on the back of softening inflation prints helped cushion the annual losses.
On his list of potential surprises for 2023, Robertson said the index could slide another 50% to 6,000.
“The technology sector broadly continues to suffer in 2023, weighed down by plunging demand for hardware, software and semiconductors,” he speculated.
“Further, rising financing costs and shrinking liquidity lead to a collapse in funding for private companies, prompting further significant valuation cuts across the sector, as well as a wave of job losses.”
Next-generation tech companies could then see a surge in bankruptcies in 2023, shrinking the market cap share of these companies on the S&P 500 from 29.5% at its peak to 20% by the end of the year, according to Robertson.
“The dominance of the tech sector in the S&P 500 drags the broader equity index lower too,” he suggested, adding: “The tech sector leads a global equity collapse.”
Velocity truck rental is doing its part to help commercial fleets electrify by energizing 47 high-powered charging stations at four strategic dealer locations across Southern California. And they’re doing it now.
The new Velocity Truck Rental & Leasing (VTRL) charging network isn’t some far-off goal being announced for PR purposes. The company says its new chargers are already in the ground, and set to be fully online and energized by the end of this month at at VTRL facilities in Rancho Dominguez (17), Fontana (14), the City of Industry (14), and San Diego (2).
45 120 kW Detroit e-Fill chargers make up the bulk of VTRL’s infrastructure project, while two DCFC stations from ChargePoint get them to 47. All of the chargers, however, where chosen specifically to cater to the needs of medium and heavy-duty battery electric work trucks.
The company says it chose the Detroit e-Fill commercial-grade chargers because they’ve already proven themselves in Daimler-heavy fleets with their ability to bring Class 8 Freightliner eCascadias, Class 6 and 7 Freightliner eM2 box trucks, and RIZON Class 4 and 5 cabover trucks, “to 80% state of charge in just 90 minutes or less.”
At Velocity, we are not just reacting to the shift towards electric mobility; we are at the forefront with our customers and actively shaping it. By integrating high-powered, commercial-grade charging solutions along key transit corridors, we are ensuring that our customers have the support they need today. This charging infrastructure investment is a testament to our commitment to helping our customers transition smoothly to electromobility solutions and to prepare for compliance with the Advanced Clean Fleets (ACF) regulations.
David Deon, velocity president
Velocity plans to offer flexible charging options to accommodate the needs of different fleets, including both managed, “charging as a service” subscription plans and self-managed/opportunity charging during daily routes. While trucks are charging, drivers and operators will be able to relax in comfortable break rooms equipped with WIFI, television, snacks, water, and restrooms.
Electrek’s Take
While it feels a bit underwhelming to write about trucking companies simply following the letter of the law in California, the rollout of an all-electric, zero-emission commercial trucking fleet remains something that, I think, should be celebrated.
As such, I’m celebrating it. I hope you are, too.
SOURCE | IMAGES: Global Newswire; Daimler Trucks.
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As I peruse Alibaba for all sorts of fun and interesting electric vehicles, I often stumble across seemingly outlandish products that often have a real use case behind them. The best of those make it into the recurring Awesome Weird Alibaba Electric Vehicle of the Week column, and that’s precisely where this man-carrying drone lands today.
To be fair, I’m not sure the main purpose of this flying EV is to carry people.
They do advertise it with a few images of a person suspended beneath it to show off the drone’s carrying capacity. And at least one of the photos seems like it’s actually non-recreational as the guy appears to be in the process of accessing a communications tower platform.
I guess for those who don’t want to spend half an hour climbing a ladder to change a light bulb or swap a connector, a drone might be a shortcut to some of these difficult access areas. It could also open up the worker pool for that job to not only people with Popeye’s forearms.
But manned work doesn’t seem like the main use case for a heavy-lift drone like this.
Instead, it appears to me that it’s primarily a work drone designed for utility tasks where you’d want to lift a serious amount of weight in tools or supplies.
The stated 200 kg (440 lb) weight-carrying capacity is quite impressive, especially since the unit only weighs 40 kg (88 lb) by itself. But you’ll want that extra lift potential for a number of its other advertised uses, such as a water sprayer for cleaning tasks or a heavy-lift drone for moving supplies in mountainous or otherwise hard-to-reach areas.
Some companies even seem to use them to clean wind turbine blades.
Interestingly, the drone can either run off of its 16 on-board batteries or can be tethered to an electrical cable for continuous flying. For longer duration jobs like window washing, that’s probably the better way to go.
The batteries only offer 20 minutes of flying time, and replacing 16 batteries with freshly charged units would probably take you another 20 minutes on the ground. That limited battery flight time also means that if you are going to use it to carry workers up onto aerial platforms, you better not take the scenic route.
The drone does come with three parachutes that can automatically deploy if it enters free fall, which makes me feel only marginally better about hanging onto that rope ladder and going for a ride.
The factory also advertises that the controls can be run tethered, so you don’t have to use radio frequency in areas where it might be jammed. That has me a bit worried about what other uses they’re envisioning for a heavy-lift drone like this, but I’ll leave that for another day.
With an advertised price of US $5,000, it also seems weirdly affordable. I have no idea what the going rate for a man-lift drone is these days, but I probably would have guessed more than that. You can barely buy an electric motorcycle for that much, and those only move in a single plane.
Of course, the catch is that you have to buy two of them, as that’s the minimum order quantity from the seller. So if you’re crazy enough to strap into one of these things, you better find an equally crazy friend for the second one.
And in case it wasn’t yet clear, please don’t actually try to buy one of these from Alibaba. This column is a tongue-in-cheek exercise in exploring just how amazing and interesting the world’s largest EV provider’s catalog of wacky vehicles has become. But I am certainly not encouraging anyone to run the financial and emotional gauntlet of trying to buy something expensive on Alibaba. I’ve been there and done that, and it’s not for the timid.
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China’s first major sodium-ion battery energy storage station is now online, according to state-owned utility China Southern Power Grid Energy Storage.
The Fulin Sodium-ion Battery Energy Storage Station entered operation on May 11 in Nanning, the capital of the Guangxi Zhuang autonomous region in southern China. Its initial storage capacity is said to be 10 megawatt hours (MWh). Once fully developed, the Station is expected to reach a total capacity of 100 MWh.
The state utility says the 10 MWh sodium-ion battery energy storage station uses 210 Ah sodium-ion battery cells that charge to 90% in a mindblowing 12 minutes. The system comprises 22,000 cells.
Once the project reaches 100 MWh, it could release 73,000 MWh of clean energy each year. That’s enough to power 35,000 households and reduce carbon dioxide emissions by 50,000 tonnes annually.
In an interview with China Central Television, Gao Like, a manager at the Guangxi branch of China Southern Power Grid, said that the energy conversion efficiency of its sodium-ion battery energy storage system exceeds 92%. It’s comparable to the efficiency of common lithium-ion battery storage systems, at 85-95%.
Chen Man, a senior engineer at China Southern Power Grid, said [via the South China Morning Post] that once sodium-ion battery energy storage enters the stage of large-scale development, its cost can be reduced by 20-30%. He continued:
This can be achieved through further improvements in the sodium-ion battery structure, manufacturing process, material utilization, and cycle life, thus lowering the energy storage cost per kilowatt-hour of electricity.
Large-scale sodium-ion batteries are gaining momentum due to their lower cost and abundance of raw materials compared to lithium-ion batteries. The challenges with sodium-ion batteries have been lower energy density and shorter lifespans that can limit efficiency and long-term performance in large-scale applications.
Read more: A new sodium-ion battery breakthrough means they may one day power EVs
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