Weekly Market Commentary

June 24, 2024

The Markets

Are we at an inflection point?

The transition to renewable energy has been moving forward and may be reaching an inflection point. In 2023, global renewable energy capacity increased by almost 50 percent, reported the International Energy Agency (IEA). Renewable capacity reached all-time highs in the United States, Europe and Brazil. However, the leader in new capacity is China. In 2023, the country “commissioned as much solar PV [photovoltaic] as the entire world did in 2022,” stated the IEA’s Renewables 2023 report.

In the United States, solar power is responsible for a relatively small amount (3.9 percent in 2023) of all electricity generated; however, solar is growing faster than any other source of electricity. One reason for the growth is Big Tech companies’ commitment to clean energy. Four of the “Magnificent Seven” were responsible for “40% of the demand for large, utility-scale solar projects in the U.S. over the past five years,” reported Spencer Kimball and Gabriel Cortés of CNBC.

“To call solar power’s rise exponential is not hyperbole, but a statement of fact. Installed solar capacity doubles roughly every three years, and so grows ten-fold each decade. Such sustained growth is seldom seen in anything that matters. That makes it hard for people to get their heads round what is going on. When it was a tenth of its current size ten years ago, solar power was still seen as marginal even by experts who knew how fast it had grown. The next ten-fold increase will be equivalent to multiplying the world’s entire fleet of nuclear reactors by eight in less than the time it typically takes to build just a single one of them,” reported The Economist.

The IEA forecasted that by 2028 renewable energy sources will generate more than 42 percent of the world’s electricity. Wind and solar PV energy sources are expected to deliver about 25 percent of global electricity.

There are some obstacles to renewable energy growth, though. Current constraints include siting, permitting and grids, reported BloombergNEF. From 2000 to 2018, just 20 percent of U.S. renewable energy projects that sought to be connected to the power grid were actually connected.

“Grids were not originally set up for such a fast-paced energy system; their tools and processes were developed in a slower, less volatile world…[Renewable energy source] infrastructures are already available and rapidly increasing. However, taking advantage of renewables requires a power grid that can accommodate these intermittent energy sources,” reported McKinsey & Company’s Adam Barth and colleagues.

Last week, major stock market indices finished higher with the Standard & Poor’s 500 Index chalking up its 31^st record high for 2024 during the week, reported Jacob Sonenshine of Barron’s. Many maturities of U.S. Treasury bonds finished this week slightly higher than they ended last week.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

COIN CONUNDRUM. What do you do with loose change? Many people have informal collecting stations: a money jar in the kitchen, a slide of coins on the dryer, or a jangle of change in a backpack. Oyin Adedoyin of The Wall Street Journal reported via MSN:

“Coins are as good as junk for many Americans. Buses, laundromats, toll booths, and parking meters now take credit and debit cards and mobile payments. Using any form of physical currency has become more of an annoyance, but change is often more trouble than it is worth to carry around. The U.S. quarter had roughly the buying power in 1980 that a dollar has today.”

Sometimes, coins are exchanged for dollars at the bank, but a lot of change ends up in the trash. A waste management company in Pennsylvania recovers $500,000 to a million dollars in coins each year as it sorts metal from other waste.

And that’s just the face value of the coins.

U.S. coins often cost more to make than they are worth. The biennial report from the United States Mint showed that, in 2022, the United States spent:

• 7 cents to make a penny,
• 4 cents to make a nickel,
• 5 cents to make a dime, and
• 11 cents to make a quarter.

“Currently, Congress must pass a law to either specifically make changes to statutory coin composition or provide authority for the Mint to change to an alternative metal under certain conditions,” stated the report. Depending on the solution, a change could save the government $12 to $24 million.

The Mint recommended that Congress take steps to remedy the issue. Legislation was introduced to the 116^th Congress, which governed from 2019-2021 (the Coin Metal Modification Authorization) and the 117^th Congress, which governed from 2021-2023 (Cost Savings Act). So far, it has not been passed.

Weekly Focus – Think About It

“Don’t tell me where your priorities are. Show me where you spend your money, and I’ll tell you what they are.”

―James W. Frick, former development officer, University of Notre Dame