December 30, 2024 - The American business media was been successful at focusing global investor attention on opportunities in artificial intelligence in 2024. AI enthusiasm has helped to push the S&P 500 25.2% higher so far this year. While growth is clearly substantial in semi-conductor innovator NVDIA (Mixed; NVDA) which has seen sales jump over 150% over the past 12 months, multiple expansion on AI optimism is also a big part of the story. In particular, multiple expansion has been the driving force behind Apple (Cloudy; AAPL) which is struggling to deliver top-line growth yet trades at a remarkable 42.1 trailing 12-months P/E. It remains to be seen how much longer Apple can continue to trade at such lofty multiples without evidence that it can harness AI to generate above-average earnings growth.
Meanwhile, US financial media pay have paid less attention to unfolding geopolitical and geoeconomics trends which are reshaping global finance and trade. As we discussed in some detail in our December Top Mining & Crypto-equities Report, "The decade of bombs, bullets, bitcoin, & bullion," one of the most significant developments stemming from the Russia-Ukraine War was the freezing of Russian central bank assets held in the western financial system. That set off a rally in gold that defied all Western business media expectations as it took hold even as the Federal Reserve was in tightening mode.
Oil and gas markets have also been shaken up from the war and there remains a risk that the factors dampening oil prices could dissipate in 2025. The price of oil has remained subdued over the past year thanks in part to strong US production and the lingering impact of the Biden Administration moves to boost supply including earlier releases of crude from the strategic petroleum reserve. The calm is likely a deception. In particular, there is a risk that the Biden Administration will put sanctions on Russian oil tanker fleets in the weeks ahead. There is also a risk that US shale oil production is reaching a plateau. While we have heard that concern before, consolidation has been taking place among operators in the Permian Basin which could at the very least instill more production discipline.
The Middle East is another significant risk hanging over global oil markets. As we wrote in our Top Mining & Crypto-equities Report, while Middle East events may be unpredictable, they do not appear to be random.
In terms of natural gas, as we close out the year, supply risks are re-emerging with reports that Ukraine is blocking some Russian natural gas exports to Europe.
We believe treating these risks as simply noise is no longer a tenable position for a fiduciary to hold. As such, we expect investors to seek more exposure to more Canadian energy, gold and critical minerals stocks either as a hedge for their technology portfolios or as a source of distinct opportunity. Indeed, all it might take is for one more geopolitical surprise to happen in the weeks ahead to send investors scrambling for more of what the Canadian market has to offer.
Underappreciated changes in the global investing landscape may help explain why insiders are so bullish. Our INK Energy and Basic Materials Sentiment Indicators are both over 100%. That means there are more stocks in both sectors with key insider buying than there are with key insider selling over the past 60 days. Insider sentiment is also strong in the Financials. As we wrote last week, financial innovators may be at a relative advantage depending on how Trump's tariffs unfold. Upbeat insider sentiment in those three heavyweight sectors is helping to keep overall Canadian insider sentiment above 100% as we close off the year.