ENERGY

Demand and Geopolitical Uncertainty Are Boosting the Energy Sector In A Banner Start to the Year

Four years back, global markets stood still as US oil prices plunged into the red for the first time — hitting negative $30 on Apr. 20, 2020. This collapse spelled doomsday for industry powerhouses like Shell ($SHEL) and British Petroleum ($BP), which boldly declared that the world had finally reached peak oil demand. Luckily for them, they were wrong.

Greasing the stocks: Two years later, oil demand not only bounced back but surpassed pre-pandemic levels with record back-to-back years of demand that sent oil and gas giants like Exxon Mobil ($XOM) and Chevron ($CVX) to new heights. That’s helped the Energy Select Sector SPDR Fund ($XLE), which tracks US energy names, soar over 50% in 2021 and another 60% in 2022. The sector continues to lead the market to start 2024 — up 14% year-to-date (YTD) and closing in on an all-time high.

• With geopolitical tensions rising, US oil prices have remained steady at $85, thanks to overseas oil cartels like OPEC+ controlling supply while US producers continue to take advantage of high prices by increasing production.

• The US remained the world’s largest oil producer, keeping domestic oil prices lower than other countries, as a result of strong domestic production.

Power tripping on big deals

Oil heavyweights have invested billions in recent years to prepare for life after oil — with a particular focus on natural gas, which is anticipated to see a 50% surge in demand over the next 15 years. To capitalize on this opportunity, leaders are merging with other domestic natural gas and crude oil producers in hopes of maximizing their gains — with deals reaching their highest point since 2012 last year.

• ExxonMobil announced it would acquire Pioneer Natural Resources ($PXD) in a $64.5B deal — while competitor Chevron announced a $60B deal for Hess ($HES).

• Diamondback Energy ($FANG) — the ninth-best performing stock in the S&P 500 this year — is up over 30% YTD after revealing a $26B merger with Endeavor Energy.

Oil’s well doesn’t always end well: Before you rush to buy energy stocks, it’s worth singling out that investors are currently valuing the industry at a significant discount to the rest of the S&P 500, with a 12.8x price-to-earnings ratio — potentially signaling a slowdown in the oil and gas market. FactSet’s latest Earnings Insight warns that modestly lower energy prices are expected to hamper the sector’s earnings in Q1, but analysts have upgraded their outlook for the remaining quarters of the year due to growing power demand and global uncertainty.

PARTNERED WITH ALLEGIANCE GOLD

Beware the Digital Dollar: Unveiling Its Terrifying Realities

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LARGECAP RECAP

🎢 Disney makes the biggest expansion to California parks since 2001

Disney ($DIS) fans in Southern California can finally rejoice: after years of proposals, the City of Anaheim has unanimously approved Disney’s $1.9B expansion of its California theme parks — clearing the way for final approvals in May. It will include several new themed lands — and mark the company’s largest expansion in the state since Disney’s California Adventure opened in 2001.

• The $1.9B expansion is a tiny sliver of the $60B worth of proposed expansions made by CEO Bob Iger last year, which Disney plans to roll out over the next decade.

• This new California addition joins ongoing developments at Walt Disney World in Florida, Tokyo Disney Resort, and Disney Adventure World in France.

Theme park war: On the other side of the continent, rival Comcast ($CMCSA) is also expanding — with its new Universal Epic Universe theme park expected to open by 2025. With popular franchises like Harry Potter and Donkey Kong, Comcast could generate “hundreds of millions” in annual revenue — and potentially lure visitors away from neighboring Walt Disney World, located just 10 miles away.

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Markets & Economy

Bitcoin on the rise this week following Friday’s halving: The halving process reduces the amount of Bitcoin in circulation — but the market has been prepared for this scheduled event, so its impact on prices might not be felt in the near term. [Read]

Investor interest grows in Sony ($SONY) buying Paramount ($PARA): Paramount’s shares rose 13% after news of Sony’s bid, as both companies have clear synergies — Sony’s a successful content “arms dealer” in the streaming era, while Paramount has an extensive content library. But Paramount is still considering Skydance’s bid for now. [Read]

Volkswagen ($VWAGY) factory workers in Tennessee vote to join UAW: With 73% of employees supporting the decision, this win is pivotal for efforts to unionize more nonunion auto plants. President Biden, endorsed by the UAW, praised the outcome in a statement. [Read]

Business & Wealth

Investment strategies of the uber-wealthy: They’re investing in high-priced real estate, buying sports teams, and setting up massive family offices with separate arms for charitable giving and venture capital investments — high-roller moves that might not be easy for everyday investors to emulate. One thing they aren’t really investing in? Crypto. [Read]

America’s bridges are improving: You often hear of the US’ “crumbling infrastructure,” but bridges are moving in the right direction. The number of bridges in “poor” condition has decreased from 15% to 6.8% this century — and 2021’s bipartisan infrastructure law could continue the trend. [Read]

Finance is moving beyond Wall Street: JPMorgan ($JPM) is closing its branch at 45 Wall St. on Friday, an exodus from Manhattan’s Financial District that began around 9/11 and picked up during the pandemic. Bankers work mainly in Midtown Manhattan now, while literal Wall St. is more for tourists who want to see historic NYC buildings. [Read]

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DIGIT OF THE DAY

China Leads Gold Market Surge with 17-Month Buying Spree

China, known as the leading gold producer and buyer, isn’t only mining gold but bagging it at a rate like never before. For 17 consecutive months, China's central bank has been buying the precious metal — aiming to shift its reserves away from the US dollar despite the associated high costs and a weakening yuan. It’s the country’s longest gold-buying run (ever) and an important ingredient in the commodity’s rally to record highs this year.

• Over the past two years, China has imported over 2.8K tons of gold — experiencing a 34% increase in imports in the first quarter of this year compared to last year.

• Investments in Chinese gold exchange-traded funds have consistently risen since June — totaling $1.3B this year, contrasting with $4B in outflows.

Gold rush: The price of gold has soared to over $2.4K per ounce, but in China, demand has gold buyers paying premiums over international prices as high as $89 per ounce — up from the historical average of $7. This sustained premium indicates strong and persistent demand for gold in the country. Precious Metals Insights’ Philip Klapwijk suggests that there is “still room for demand to grow,” with the current buying trend showing no signs of slowing anytime soon.