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Welcome to September!
We may be jumping the gun on how excited we are to see August slip away as we dance into September, but if you’re reading this with a #PSL in hand, you might have noticed that sweet and spiced latte cost about 4% more this year. As we talked about last week, inflation is hitting everything, everywhere. And the latest comments from central bank leaders make it clear they are planning to squash it — even if it hurts job growth, makes purchasing a house more expensive, or depresses the stock market.
That’s right. Fed Chair Jerome Powell made headlines after declaring last Friday that he and his colleagues will keep raising interest rates until they get inflation under control — and if that causes some pain, so be it. Powell’s global peers echoed that message. Isabel Schnabel, a top European Central Bank official, said central banks must act aggressively, even if that means tipping their economies into recession.
This is not a surprise, as inflation is 3 times higher than the Fed’s target of 2 percent, but the dreaded ‘R’ word spooked investors, with the Dow promptly falling by just over 3%, the S&P 500 by 3.4%, and the Nasdaq Composite by 3.9% — erasing all of August’s gains by Friday’s market close. Stocks have continued to fall this week, with businesses expecting consumers to continue tightening their belts and economists predicting jaw-dropping job losses if the Fed sticks to its targets. This has led to reports of airlines bracing for a grim winter, oil prices dropping (remember when this was a good sign?!?) because of an expected downturn in economic activity and even discount retailers are seeing shoppers pull back.
If you feel your anxiety ratcheting up, here are some tips from experts on how to manage your money during a recession. In addition, Kiplinger offers a rundown on how to protect your assets and your emotions amid a looming market slowdown. For those looking for a silver lining, some economists continue pointing to encouraging signs (like the declining unemployment rate), but these voices seem to be getting fewer and fainter.
The advice experts usually give to young investors during times like this is to stay invested in strong companies that you think will stay that way for the long term, diversify your portfolio with different sectors and assets to protect it from big blows, and maintain an emergency fund so that you always have access to cash. This also has a way of keeping the day-to-day stock watching anxiety at bay. With T-minus 20 days until the next Fed meeting, most market watchers are predicting another rate hike of three-quarters of a point. In the meantime, we’ve got some insights for you this week on why you might do well looking toward space, as well as other news you might have missed while the Fed has been dominating headlines and staying up late to watch Serena.
News you can use
- Warren Buffett’s energy favorite Occidental Petroleum will begin construction for its first carbon capture project this fall. New tax credits in the Inflation Reduction Act are expected to kickstart more such projects soon, which could become another way for sustainable investors to measure progress. Occidental is just one of the large oil producers exploring diversification into areas meant to curb climate change.
- Monday is Labor Day here in the US, and many Americans will be hitting the road as gas prices ease. If you know about the shopping and BBQs but are hazy on the history, the Department of Labor dropped a new animated video. Gallup says US approval of labor unions is at its highest point (71%) since 1965 amid “a burst of 2022 union victories across the country,” including at Amazon and Starbucks.
- First Solar, the largest solar panel manufacturer in the country, is investing up to $1.2 billion in a new factory in the Southeast and an expansion of its Ohio unit. While the technology was invented here, the US has lagged behind other countries in production. Seven of the world’s top 10 solar panel makers are headquartered in China. First Solar says it was spurred to act by the passing of the Inflation Reduction Act this year. Their stock is up a whopping 38% in 2022, massively outperforming the Invesco Solar ETF (TAN).
There’s been an uptick in news headlines about space in recent weeks, whether it’s the new cold war, business and tech advances, or truly out of this world (he,he) photo dumps.
With our social feeds regularly full of SpaceX launches, eye popping images from Mars and of deep space from the James Webb Telescope, and the potential of returning to the moon, it’s an exciting time for the 🚀 field and for humanity. Beyond bringing us scientific discoveries about the universe, space exploration also helps us improve life here on Earth. That’s why we decided to look at some opportunities the final frontier offers investors.
Earth-observation satellites are being used to look down on us (which can be creepy to think about) to map how our world is changing, a key element in tracking climate change and identifying ways to innovate and adapt. These satellites can measure changes in things like temperature, ground movements, biodiversity, soil or air quality, and sea levels around the world, and keep climate researchers in far-flung areas connected. Businesses, insurance providers, and investors can use this geospatial tech to identify new opportunities as well as physical risks to infrastructure and real estate. Other applications include urban planning, protecting natural resources, disaster management, spotting illegal trafficking, and military intelligence.
Additionally, satellite internet providers, like SpaceX’s Starlink, can provide broadband services to those in rural and remote areas. The stories of the impact this played on helping Ukraine rebuff Russian attacks and stay online are pretty amazing.
Some public companies involved in satellite communications and delivering the data needed for mapping include Iridium Communications, Viasat, BlackSky, Planet Labs, Satellogic, Maxar Technologies, and Spire Global.
An emerging technology that can close gaps in worldwide cell coverage is satellite connectivity to cell phones. Over half a million square miles in the US are considered cellular dead zones because there aren’t enough towers to provide coverage. But if phones can connect to each other and the internet via satellite, it can help bridge the digital divide and be a blessing in the aftermath of disasters when infrastructure on the ground is destroyed or there’s network congestion.
Who’s working on this? Look no further than Apple… maybe. There’s speculation the company will finally debut a direct satellite connectivity feature with Globalstar at their September 7 iPhone launch event. Reports say this would offer emergency texting/voice services in areas with no cell coverage. While Apple is no Taylor Swift, it’s likely the event’s tagline (“Far Out”) and artwork are hints.
Space begins at some 62 miles above the earth, and the business of launching satellites and spaceships into it is, well, literally rocket science.
Many new investors are disappointed when they find out that Musk's SpaceX and Jeff Bezos’ Blue Origin, two prominent launch vehicle players, are private firms. But there are more than a handful of public companies — giants and smaller firms — now involved in space launches and infrastructure.
Take NASA’s upcoming unmanned Artemis I launch, an example of the collaboration required in the space industry. Lockheed Martin developed the Orion spacecraft, which includes a camera system from Redwire, solar cells and satellite dispensers from Rocket Lab, a nanosatellite from Terran Orbital, and 4D LiDAR technology from Aeva. KULR Technology is testing lithium-ion cells going into the battery packs. The rocket has been built by Aerojet Rocketdyne, Boeing, and Northrop Grumman (also the lead on the James Webb Telescope). This map shows you all of the companies that partnered with NASA on this mission.
The space industry is tracked by a few exchange-traded funds or ETFs with nerdy symbols that we love. For example, the Procure Space ETF (UFO), SPDR S&P Kensho Final Frontiers ETF (ROKT) and ARK Space Exploration & Innovation ETF (ARKX).
Be afraid of the dark
The space industry represents the great unknown in more ways than one. Organizations with unproven products are very risky to bet on and should be dealt with carefully. There is a danger of speculative bubbles and stock crashes. The current macro environment of rising interest rates is also especially unkind to growth companies like these.
If you want to add some space stocks to your portfolio, make sure to study the companies carefully and stay informed on the latest tech developments. You can also turn to Wall Street analyst ratings for guidance. For those of you who are focused on sustainability, elements like mapping may be appealing — but you also may need to weigh the environmental impact of all those launches and development. Those who seek to screen out arms manufacturers may also need to look closely at the giants mentioned here, as their products are wide-ranging.
Before you go -
** FWIW team members own shares of Amazon, Apple, Northrup Grumman, RocketLab, and Starbucks