Overnight the Dow Jones fell after both Goldman Sachs and Morgan Stanley reported a hit to their profits.
The other big piece of news was that 2022 was one of the worst years on record for growth in China. China’s economy grew 3% for the year, well below its 5.5% official target, after lockdowns and pandemic restrictions slowed the economy.
It shows that markets are on a delicate balance and that there’s a lot of uncertainty out there.
My colleague Vern Gowdie thinks 2023 could be the year of the ‘Big Loss’. It’s why he has organised a free four-part strategy session to help investors protect their capital.
Vern was a financial planner for 22 years, specialising in wealth preservation. So, if you want to hear more about Vern’s analysis, click here.
Still, there are some bright spots in the markets.
In fact, a company recently committed US$2.5 billion to one industry…and an announcement in Davos yesterday could bring even more money into one sector…
Solar stocks are having quite the year
The BetaShares Solar ETF [ASX:TANN], which follows global solar companies like First Solar, is up close to 9% since the beginning of the year.
Solar stocks spiked recently after Q Cells said it would invest more than US$2.5 billion to expand its solar module manufacturing operations in the state of Georgia in the US.
Q Cells is owned by South Korea-based Hanwha Group. With this investment, Q Cells is looking to take advantage of tax credits from the recently passed Inflation Reduction Act in the US to build out a US solar supply chain.
As Canary Media writes (emphasis added):
‘Under the 45X production tax credit structure created by the Inflation Reduction Act, each domestically produced part of this solar manufacturing process will receive its own tax benefits, said Scott Moskowitz, Qcell’s head of market strategy and public affairs.
‘The goal of this tax-credit structure, first put forward by U.S. Senators Jon Ossoff (D) and Raphael Warnock (D) of Georgia and other Democrats as the Solar Energy Manufacturing for America (SEMA) Act, is to make each stage of the solar production process cost-competitive with materials and products coming from overseas.
‘“All these credits stack,” Moskowitz said, with each stage in the process adding tax-credit value to the final product. Taken together, these credits could cover about half the cost of producing a solar panel.’
At the moment, the main competitor is China, with an around 80% share in all key areas of solar panel manufacturing.
But Q Cells is the latest company to put money into clean energy manufacturing in the US.
Granted, much of the investment has been in boosting the US’s EV and battery manufacturing sector, but the IRA is certainly attracting plenty of investment into the US.
For instance, Honda and LG have said they are planning to build a US$4.4 billion electric battery factory in Ohio to make batteries in the US…
…BMW plans to invest US$1.7 billion to build EVs and batteries in South Carolina…
…and Panasonic has pledged US$4 billion to build a battery plant in Kansas.
So, you can see how the Act could really be a catalyst for accelerating investment into EV supply chains in the US…but money is also flowing into some Aussie companies involved in developing some of those supply chains.
For example, on Friday, Ioneer got a conditional loan commitment for $1 billion to develop its Rhyolite Ridge lithium-boron project in Nevada.
In short, the IRA has pledged billions in energy security and climate spending, and it’s already boosting clean energy stocks.
And the effects of the IRA will be felt for years to come as private investment starts to pour in to match government spending actions.
The EU is readying its own version of the IRA
All these investment incentives into the US haven’t gone unnoticed.
In Davos yesterday, fearing that all this money will drive some of its industry away, the European Union announced it’s drafting its own Net-Zero Industry Act.
As Ursula von der Leyen, president of the European Commission, said, the Act will look to attract investment and manufacturing into the EU to compete with the US:
‘To keep European industry attractive, there is a need to be competitive with the offers and incentives that are currently available outside the EU.
‘The aim will be to focus investment on strategic projects along the entire supply chain. We will especially look at how to simplify and fast-track permitting for new clean tech production sites.
‘We need to create a regulatory environment that allows us to scale up fast and to create conducive conditions for sectors crucial to reaching net zero. This includes wind, heat pumps, solar, clean hydrogen, storage and others.’
So, while things may turn dire out there, remember this is an exciting time for clean energy.
Editor, Money Morning