Trump Constrained Scenario: Energy Dominance And Transition In Parallel

Economic

Energy

Summary:

The US energy transition is expected to slow down due to weakened regulation and funding support. However, the Inflation Reduction Act (IRA) is likely to survive because of its job creation and economic benefits. Nonetheless, without a comprehensive climate policy ecosystem, the US green agenda may become obscured.

Under a second term for Trump – even without Republican control of Congress – the speed of decarbonisation in the US will slow down due to weakened energy and environmental regulation, clean energy funding support, and international climate leadership. Nevertheless, the IRA is likely to survive given the economic benefits it can create. Still, without a comprehensive climate policy ecosystem, the US green agenda may become obscured.

Oil and gas

We could witness reinforced US energy dominance through increased oil and gas production and exports. This includes promoting LNG production, contrary to Biden’s moratorium on licensing new LNG exports, which was recently halted by a federal judge. It also involves cancelling methane regulations and streamlining the authorisation process for new oil and gas exploration and infrastructure projects.

IRA

The IRA is unlikely to be completely repealed. Only Congress can vote to repeal the IRA – or indeed any legislation – and this would be hard to achieve under a split or Democrat-controlled Congress. Plus, Republican states have been huge beneficiaries of the IRA, with about 80% of announced investment in clean energy flowing into Republication congressional districts and creating green jobs.

The legislation has also gained popularity among corporations and investors, and they would be reluctant to see the financial incentives go. Think about Obamacare: Trump was keen to strike it down as president, but Congress was not able to repeal it as the law gradually became more popular thanks to the public buy-in of its benefits.

However, the implementation of the IRA will become harder. The qualifying rules for certain tax credits could become stricter, especially around using domestically produced content for clean energy manufacturing. There would be little focus on equipping government staff with the know-how to review clean energy funding applications. As a result, we could see longer application timelines slowing down project development.

Moreover, while the IRA itself is likely to survive, as much as 30% of the energy and climate-related funding under the IRA is at various degrees of risk of being scaled back. Several tax credits, especially the consumer electric vehicle (EV) tax credits that have an initial spending estimate of $12bn, can be rolled back. The $100bn non-tax credit funding, including loans and loan guarantees from the Department of Energy’s (DOE’s) Loan Programs Office (LPO), as well as dedicated grants toward environmental justice, may also be lowered, if not stalled. The DOE has committed about $30bn of clean energy loans and loan guarantees to companies, but has only started lending around $6.5bn.

The tax credits that are likely to remain unchanged include those for carbon capture and storage (CCS), hydrogen, renewable power, nuclear, and manufacturing, among others (this will be further analysed in the following sections). It is worth noting, however, that since the tax credits under the IRA are non-capped, the actual spending can be a lot higher, potentially adding more pressure to fiscal sustainability and hence spending compromises.

Breakdown of initial energy and climate related spending estimates under the IRA

Source: ING Research, Joint Committee on Taxation, Senate Democrats

EVs

The EV industry has been a punching bag of Trump’s campaign, with his team declaring on the Republican policy platform to reverse Biden’s EV policy and scrap the nationwide EV production and sales targets.

As such, EV tax credits are highly likely to be scaled back. Plus, these tax credits are consumer-based, not manufacturer-based, and may be repealed more easily with softer business pushback. This can be done through tightening tax credit eligibility guidelines. It can also be done by putting a cap on the number of EVs allowed to receive EV tax credits.

Moreover, the funding for developing the National Electric Vehicle Infrastructure (NEVI) programme under the Infrastructure Investment and Jobs Act (IIJA) will likely be lowered because of the unpopularity of EVs among Republicans and the slow speed of funding being distributed to projects.

Lastly, the Environmental Protection Agency‘s (EPA’s) strictest-ever proposed rule on vehicle emissions standards, aimed at boosting EV demand, is also likely to be reversed, even though car manufacturers may have already made investment decisions to reduce tailpipe emissions.

Car manufacturers remain committed to electrifying their fleet, despite some recent delay in EV production targets. However, a lack of direct EV support, especially from the infrastructure side, would mean a slower deployment rate overall.

Renewable power

The centrepiece policies that have led to massive development in renewable technologies and project finance are the renewable power Production Tax Credits (PTCs) and Investment Tax Credits (ITCs). Enacted in 1992 and 2005, respectively, the PTCs and ITCs have been extended under the IRA until 2032, but starting in 2025, these credits will become "technology-neutral" as long as a project can demonstrate it has zero or negative emissions.

This means that a wider range of technologies – including solar, wind, hydropower, geothermal, marine, nuclear, and waste energy recovery – will become eligible. Notably, combustion and gasification (C&G) facilities can also potentially qualify for the credits. The technology-neutral tax credits are set to start phasing out after 2032, or when emissions from the US power sector have dropped to below 25% of 2022’s emissions level, whichever comes later.

The technology-neutral tax credits will likely survive if Trump wins but Republicans fail to control Congress. This is because even under the first Trump administration, the technology-specific ITCs and PTCs were not repealed and solar and wind continued to develop steadily. Furthermore, the expansion of eligibility under the technology-neutral tax credits can benefit non-renewable zero-emission projects, a provision that may be welcomed by Republicans.

These positive spins do not mean that the industry will get sufficient support to accelerate clean power development. We would expect less effort to re-train government staff, build transmission lines, or reform the grid. There could also be more gas-fired power plants approved to support increasing electricity demand.

Hydrogen and CCS

Hydrogen (especially blue hydrogen) and carbon capture and storage (CCS) will gain continued support, as these technologies can provide business opportunities to oil and gas companies and heavier industries. Hydrogen and CCS hubs would continue to develop in this case, with permitting reforms potentially improving the regulatory conditions for CCS project development. A potential downside risk is that any cuts in the DOE’s Loan Program Office’s (LPO’s) loans or loan guarantees would affect the funding for these projects.

Critical minerals

For Trump, onshoring manufacturing and protecting key sectors would be a priority. This means enhanced protectionist efforts such as import tariffs in favour of batteries and critical minerals. Trump is now proposing to impose a 10% tariff on all goods and a 60% tariff on all Chinese goods.

Less competition in the US could strengthen domestic clean energy supply chains, but questions remain as to how fast they can be built up. China’s absolute dominance in critical minerals means that the US may face sourcing challenges and need to accelerate partnerships with other suppliers. Thus, the US could in the short to medium term bear higher costs in the energy transition.

Regulation

There would be substantial rollbacks of punitive regulations that limit dirty economic activities. For instance, there could be cancellations on Biden’s effort to charge a fee on methane emissions from the oil and gas industry. The EPA’s rule on vehicle emissions standards is also likely to be reversed.

The EPA’s newly finalised regulation to reduce emissions from coal and gas-fired power plants in the 2030s unless they can demonstrate deep emissions reduction is also at a high risk of being overturned.

Climate leadership

Regardless of which party controls Congress under a second Trump administration, we would see the US retreat from international climate leadership. This features a second withdrawal from the Paris Agreement, withdrawal from potential commitments such as a recent one (under discussion) to the UN Treaty to End Plastic Pollution, stalled or even cancelled efforts to mandate climate data disclosure, and less clean energy technology innovation, among others.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Economic

American consumers and home buyers, business people and political leaders have been waiting for months for what the Federal Reserve is poised to announce this week: That it’s cutting its key interest rate from a two-decade peak.

It’s likely to be just the first in a series of rate cuts that should make borrowing more affordable now that the Fed has deemed high inflation to be all but defeated.

Consider Kelly Mardis, who owns Marcel Painting in Tempe, Arizona. About a quarter of Mardis’ business comes from real estate agents who are prepping homes for sale or from new home buyers. Customer queries, he recalls, quickly dropped almost as soon as the Fed started jacking up interest rates in March 2022 — and then kept raising rates through July 2023.

As the housing market contracted, Mardis had to lay off about half his staff of 30. It was the worst dry spell he had experienced in 14 years.

After the Fed begins cutting rates on Wednesday, Mardis envisions brighter times ahead. Typically, a succession of Fed rate cuts leads over time to lower borrowing costs for things like mortgages, auto loans, credit cards and business loans.

“I’m 100% sure it would make a difference,” Mardis said. “I’m looking forward to it.”

At the same time, plenty of uncertainty still surrounds this week’s Fed meeting.

How much will the policymakers decide to reduce their benchmark rate, now at 5.3%? By a traditional quarter-point or by an unusually large half-point?

Will they keep loosening credit at their subsequent meetings in November and December and into 2025? Will lower borrowing costs take effect in time to bolster an economy that is still growing at a solid pace but is clearly showing cracks?

Chair Jerome Powell emphasized in a speech last month in Jackson Hole, Wyoming, that the Fed is prepared to cut rates to support the job market and achieve a notoriously difficult “soft landing.” That is when the central bank manages to curb inflation without tipping the economy into a steep recession and causing unemployment to surge.

It’s not entirely clear that the Fed can pull it off.

One hopeful sign is that as Powell and other Fed officials have signaled that rate cuts are coming, many interest rates have already fallen in anticipation. The average 30-year mortgage rate dropped to 6.2% last week — the lowest level in about 18 months and down from a peak of nearly 7.8%, according to the mortgage giant Freddie Mac. Other rates, like the yield on the five-year Treasury note, which influences auto loan rates, have also tumbled.

“That really does help lower those borrowing costs across the board,” said Kathy Bostjancic, chief economist at Nationwide Financial. “That helps to give nice relief to consumers.”

Businesses can now borrow at lower rates than they’ve been able to for the past year or so, potentially boosting their investment spending.

“The question is if it’s helping quickly enough ... to actually deliver the soft landing that everyone’s been hoping for,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities.

Many economists would like to see the Fed announce a half-point rate cut this week, in part because they think the officials should have begun cutting rates at their previous meeting in July. Wall Street traders on Friday signaled their expectation that the Fed will carry out at least two half-point cuts by year’s end, according to futures prices.

Yet Goldberg suggested that there would be downsides to implementing a half-point rate cut this week. It might signal to the markets that the Fed’s policymakers are more worried about the economy than they actually are.

“Markets could assume that something is wrong and the Fed sees something quite terrible on the horizon,” Goldberg said.

It could also raise expectations for additional half-point cuts that the Fed might not deliver.

In the long run, more important than Wednesday’s Fed action is the pace of rate cuts through next year and the ultimate end point. If Fed officials conclude that inflation is essentially defeated and they no longer need to slow the economy, that would suggest that their key rate should be at a more “neutral” setting, which could be as low as 3%. That would require a series of further rate cuts.

Many economists think the economy needs much lower rates. Diane Swonk, chief economist at KPMG, notes that hiring has averaged just 116,000 a month for the past three months, a level equivalent to the sluggish job growth coming out of the 2008-2009 Great Recession. The unemployment rate has risen by nearly a full percentage point to 4.2%.

“There is a fragility out there when you are not hiring at a very strong pace,” Swonk said. “This is still a much weaker labor market then we thought we had.”

Still, Fed rate cuts may provide a crucial boost to the economy just when it’s needed.

Michele Raneri, head of U.S. research at TransUnion, a credit monitoring company, noted that lower rates typically lead consumers to refinance high interest-rate debt — principally credit card borrowing — into lower-cost personal loans. Doing so would ease their financial burdens.

And once mortgage rates fall below 6%, Raneri said, more homeowners will likely be willing to sell, rather than holding on to their house out of reluctance to swap a low mortgage rate for a much higher one. More home sales would help relieve the supply crunch that’s made it hard for younger people to buy a first home.

“That starts to break up this logjam that we’ve been in where there’s a low inventory of houses,” Raneri said. “We need some people to start moving to start that churn.”

Other small businesses are seeing signs that the churn is picking up. Brittany Hart, who owns a software consulting firm in Phoenix that works with mortgage brokers, wealth managers and banks, is noticing more interest from potential clients in adopting new software to boost efficiency. That is because they expect the housing market to pick up.

Hart has started looking for three new employees to help handle the expected business, to add to the roughly 20 employees she has now.

“This is the first leading indicator that we are getting back to that normal activity in the housing market,” she said.

Source: AP

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Citibank

Economic

Portfolio considerations

Reflecting uncertainty, “defensive” industries such as utilities have a history of outperforming the S&P 500 by 2.2 percentage points on average in the six-months prior to US presidential elections since 1990, then underperforming by 1.4 percentage points in the six-months after. Current market trends are conforming to this pattern.

“High dividend yield” strategies have outperformed in the past two months, but this is partly a reflection of the sharp decline in large cap US Tech shares (The market cap weighted semiconductor index - comprised 60% of Nvidia – is off 22% since early July). We would tend to favor high quality consistent dividend growers over the “highest yielders” after recent market moves. We also doubt that a single AI-tech play will dominate markets in 2025. Small cap stocks – measured by the Russell 2000 – have a history of strong outperformance only in the first year of a new economic recovery. They have to go through a recessionary contraction before this happens.

Since credit markets have been solid and there has been no “near death” moment for the Russell, we don’t see a particularly strong return outlook for lower quality SMID.

The Strategy for Uncertainty? Raise Quality_1

September is Historically Negative for the S&P 500

First, we would note that a skittish performance of markets about two months ahead of an uncertain US presidential election is entirely normal. Weak data and weak markets frequently go hand in hand in late summer. Since 1930, the only month that averages a negative return for the broad US market is September (though many positives and negative have been experienced in particular years). When one includes only US presidential election year uncertainty, the weakness extends to October.

We are cautious of depending on historic patterns without assessing wider factors. But to date, it is notable that the composition of market activity is also following historic, election year norms. Defensive industries such as utilities, healthcare, and staples have typically outperformed a downwardly biased equity market in the six-months before US elections. On average, they go on to underperform a rising US equity market in the six months after US elections are out of the way.

Allocate to Higher Quality to Deal with Uncertainty

But what is a standout that may potentially endure through a variety of uncertain scenarios? The discipline of managing a firm to pay a higher dividend over many years “screens out” most firms, leaving a high-quality bias. This is not always what produces the highest return over short periods. Over cycles, it tends to eliminate heavily indebted firms.

Heavily indebted cyclical firms that survived economic crashes historically produced large “bounce-backs” in the year following the start of new economic cycles. While we often wish we could tell investors a more exciting story, no economic crash appears at hand, and certainly none has already happened. Without a large drop first, a stronger burst of performance for low quality leveraged cyclicals is not at hand.

Dividend Growers have Consistently Outperformed

What are some wider factors one should consider to understand markets now? For one, tech shares posted one of the five strongest outperformance periods in the past 25 years through early July. With just three US tech mega-caps rising to nearly $10 trillion in aggregate value in 1H 2024, returns were “sucked” out of other industries. Until 2Q of this year, EPS gains were sparce for most sectors. AI promises beckoned until the momentum faded. But since July, equity investors have turned to the tangible returns of high dividend yielders such as utilities as interest rates fell.

With tech correcting lower “high current yield” shares reaching record high levels, we would emphasize the left-behind dividend growth shares that have lagged. Tech (offense) and utilities (defense) are necessary components of a diversified equity portfolio. But even together, the two sectors wouldn’t make for a complete portfolio.

Election and economic policy uncertainty is likely to remain high until early November at a minimum. This should not stop investors from assessing if their portfolios are positioned to best suit their needs. The days of a 5% cash yield are nearly over with the Fed set to cut policy rates on September 18. So are the days when a single stock drove nearly a third of US equity market returns as Nvidia did this spring. Intermediate duration bonds are still yielding more than the Fed’s own expected policy rate over the next few years and can still benefit from Fed rate cuts, if marginally. Most global equities – apart from US tech – trade near long-term historic valuations.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Cryptocurrency

Bitcoin starts a pivotal macroeconomic week with the battle for $60,000 support raging.

After slipping into the weekly close, BTC price action is acting in a key area of interest for bulls.

Price indicators reveal the extent of the need to reclaim $60,000 — a resistance/support flip here would improve the setup of both the daily and weekly charts.

This week sees the United States Federal Reserve in the driving seat as it decides on the size of what could be its first interest rate cut in over four years.

Markets are confident that the outcome will be just that — but last-minute uncertainty is pushing expectations that the Fed’s move will be more drastic than the bare minimum.

Bitcoin analysts are biding their time before drawing conclusions on how BTC/USD may react.

Bitcoin dominance is at three-and-a-half-year highs, and ETH/BTC spells out taxing times for altcoins.

BTC price weekly close brings bulls down to earth

Bitcoin came under pressure into the Sept. 15 weekly close, costing bulls both $60,000 and a chunk of the week’s recovery.

Data from Cointelegraph Markets Pro and TradingView shows BTC/USD circling the $59,000 mark at the time of writing, having still managed to gain 7.8% over the past week. Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_1

Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_1

BTC/USD 1-hour chart. Source: TradingView

“Its going to be a choppy week for Bitcoin,” popular trader and analyst Mark Cullen summarized in a post on X.

Cullen focused on the week’s main macroeconomic event in the form of the United States Federal Reserve’s interest rates decision due on Sept. 18.

“Red start to the week, and key interest rate decision announcement on Wednesday,” fellow trader Jelle continued.

“Hold the current area until then - and I think it looks great for further upside.” Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_2

BTC/USDT chart. Source: Jelle/X

However, analyzing longer timeframes, Caleb Franzen, founder of Cubic Analytics, saw both the 365-day simple (SMA) and exponential (EMA) moving averages functioning as support.

“Since the initial breakout move in March & April 2023, BTC has been able to stay above its 1-year average and even flip it into support on several occasions, even during the recent pullback in August & September,” he noted in a blog post on Sept. 14.

“Could it be the case that Bitcoin is simply retesting its 1-year average before continuing higher, as it did in Q2 & Q3 2023? Until proven otherwise, yes!” Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_3

Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_3

BTC/USD 1-day chart with 365-period SMA, EMA (screenshot). Source: Cubic Analytics

Bitcoin indicators spell out resistance hurdles

BTC price indicators are facing a crucial resistance retest as Bitcoin bulls turn up the heat on $60,000.

As Cointelegraph reported, both the Ichimoku cloud and relative strength index (RSI) show key levels primed for being flipped back to support.

However, thanks to the lackluster weekly close on both daily and weekly timeframes, these continue to form a barrier to upside continuation.

On weekly timeframes, BTC/USD remains stuck below the Tenkan-sen and Kijun-sen trend lines on Ichimoku, while RSI is likewise pinned below the key 50 mark. Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_4

Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_4

BTC/USD 1-week chart with Ichimoku cloud, RSI data. Source: TradingView

The daily chart looks moderately better, with the price above 50 but still below the Ichimoku cloud. Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_5

Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_5

BTC/USD 1-day chart with Ichimoku cloud, RSI data. Source: TradingView

On 3-day timeframes, meanwhile, trading team Stockmoney Lizards is eyeing a bullish RSI divergence with price now ripe for playing out to bulls’ advantage.

“A lot is pointing towards a reversal within the last two weeks of September. Uptober is coming,” it summarized. Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_6

Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_6

BTC/USD 3-day chart with RSI data. Source: Stockmoney Lizards/X

Markets bet on Fed rate cut curveball

One event is set to shape macroeconomic volatility this week: the US Federal Reserve’s interest rate cut.

The first since March 2020, the move, which will only be confirmed at the Federal Open Market Committee (FOMC) meeting on Sept. 18, has nonetheless long been priced in by markets.

The only question is how large it will be; the debate currently centers on 0.25% and 0.5%, and the latest data from CME Group’s FedWatch Tool currently sees the latter as more likely. Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_7

Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_7

Fed target rate probabilities. Source: CME Group

For Bitcoin, the picture is complex — while risk assets should technically benefit from the added liquidity flowing into markets as a result of policy easing, observers are already drawing comparisons not to past good times, but crashes.

“While rate cuts may sound positive, it signals deeper concerns—like collapsing borrowing, spending, and investment,” financial analyst and investor Jacob King, CEO of crypto newsletter WhaleWire, told X followers at the weekend.

“Historically, sharp cuts have preceded recessions. Why? It shows the government is scared and scrambling to reverse an overreach.”

King specifically referenced the 2008 Global Financial Crisis as the elephant in the room.

“The warning signs today mirror those of 2008: rising unemployment, plummeting housing starts, falling home sales, and declining economic activity. Even the Fed funds rate chart looks eerily similar to 2007,” he concluded.

Others are eyeing Bitcoin’s close correlation to broader global liquidity conditions, these now on the rise, as grounds for optimism. Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_8

Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_8

Source: Quinten

Popular trader Rickus is meanwhile among those preparing for a bullish BTC price reaction. In part of his own X analysis, he stated:

“If you think rate cuts somehow will cause a selloff on BTC this week then you might have another thing coming, It wont cause panic if there's no panic in the stock market in the 1st place- IF rate cuts happen then generally the 1st cuts can be very bullish actually and has been known to coincide with price rises depending the back drop.”

Rickus argued that macro conditions are “vastly different” to 2008.

BTC price behavior shows “uncanny” patterns

Since its most recent cycle low in late 2022, BTC/USD has been copying history with “uncanny” precision.

That is according to popular analyst Checkmate, creator of onchain data resource Checkonchain.

Uploading a chart of Bitcoin Index activity to X, Checkmate revealed a striking pattern to BTC price action since the pit of the last bear market.

BTC/USD closely resembles its recovery from cycle lows of the past, providing key context to a year that has seen complaints of sluggish performance.

“Uncanny. Bitcoin is in the exact same spot as the last two cycles since the low,” he summarized.

“I prefer the cycle low comparison the most as it describes the psychological time it takes for investors to recover from a bear market. Upside measures are not relevant, but duration can be.” Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_9

Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_9

Bitcoin Index performance since cycle low. Source: Checkmate/X

Checkmate referenced another iteration of the Bitcoin price progress — that which measures activity between halving events.

By that token, onchain analytics firm Glassnode shows the current cycle is something of an underperformer. Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_10

Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_10

Bitcoin price performance since each halving. Source: Glassnode

Ether suffers as Bitcoin dominance taps 58%

Despite BTC price struggles, times are tough for Ether in the current Bitcoin bull market.

Data shows the extent of the largest altcoin’s comparative weakness as ETH/BTC sets new multi-year lows.

The pair is currently languishing at levels not seen since April 2021, setting new lows of 0.0387 on Sept. 16.

Reacting, Alex Thorn, head of research at Galaxy Research, noted that the pair had lost over 50% since Ethereum’s Merge two years ago. Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_11

Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_11

Source: Alex Thorn

In turn, Bitcoin’s share of the overall crypto market cap continues to rise.

New highs of 58.07% came on Sept. 16, marking the most “Bitcoin-heavy” crypto market in three-and-a-half years.

“I'm expecting Bitcoin dominance to be peaking out in this area,” crypto trader, analyst and entrepreneur Michaël van de Poppe predicted.

“All depending on $ETH, but it seems like we're close, given the current sentiment.” Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_12

Bitcoin crypto market cap dominance 1-week chart. Source: TradingView

Van de Poppe nonetheless sees both altcoins as having “bottomed out” and Bitcoin itself due a fresh all-time high as soon as next month.

“Gold is making new ATHs, and Bitcoin is expecting to follow that path,” part of another X post reads, referencing recent gold performance.

“New ATH in October.” Markets See 0.5% Fed Rate Cut — 5 Things to Know in Bitcoin This Week_13

BTC/USDT 4-hour chart with RSI data. Source: Michaël van de Poppe/X

Source: Cointelegraph

Risk Warnings and Disclaimers

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Thomas

Commodity

In the second quarter of 2024 (2Q2024), Malaysia's retail sales decelerated to 0.6%, falling short of market expectations, according to Retail Group Malaysia (RGM).

In June, members of the Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA) projected a growth rate of 1.7%, making the actual result 65% below the estimate.

Despite an attractive ringgit and visa-free entry for tourists from China and India, which boosted foreign tourist numbers, festive sales during Hari Raya Aidilfitri, celebrated from April 10, did not meet expectations.

"Retail prices continued to rise during 2Q2024. Malaysian consumers needed to manage their monthly expenses carefully in order to maintain their lifestyles.

"The never-ending Israel-Palestine conflict had affected businesses of certain international retail brands," said RGM in its most recent report.

Overall, the Malaysian retail industry grew by 4.6% in the first six months of 2024, compared to the same period in 2023.

Looking ahead, the majority of members of the MRA and MRCA are optimistic about the next three months. They estimate an average growth rate of 3.6% in retail sales for 3Q2024.

Department store operators predict a recovery with a growth rate of 7.3%, followed by supermarket operators with 5.8%.

Supermarket and hypermarket operators expect a moderate growth of 1.9%, while mini-markets, convenience stores and cooperatives foresee a 2.3% increase.

The fashion and fashion accessories sector is expected to remain vibrant with a growth rate of 7.4%. Retailers selling children's and baby products anticipate a 2.7% growth, whereas pharmacy operators expect a slowdown with a 1.2% increase.

Retailers in the personal care sub-sector are particularly optimistic, forecasting a 23.5% growth rate. However, operators of furniture, home improvement and electrical and electronics sectors are pessimistic, predicting a 1.9% contraction, marking the third consecutive quarter of decline.

Retailers in other specialty stores, including photo shops and online shopping platforms, expect a 2.6% improvement.

RGM maintained its 3.6% growth forecast for 2024, considering the softer market in 2Q2024, and higher estimates for 3Q2024.

The retail sector is anticipated to grow by 3.6% in 3Q2024, and 3.2% in 4Q2024.

Challenges such as rising living costs, increased service tax rates and floating diesel prices have reportedly impacted retail spending.

Meanwhile, the introduction of a new flexible account by the Employee Provident Fund and cash handouts under the Sumbangan Tunai Rahmah programme are said to have provided some relief.

The government's efforts to attract tourists have also reportedly benefited retail businesses, with significant increases in tourist arrivals from China and India.

Additionally, the Malaysian government will increase civil servant remuneration from Dec 1, which is expected to stimulate retail sales during the year-end holiday season.

The government targets 27.3 million tourists and RM102.7 billion in tourist receipts for 2024, further boosting the retail sector.

Source: The edge markets

Risk Warnings and Disclaimers

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Alex

Economic

Political

In a nutshell

Kamala Harris may continue Biden’s policies, but adjustments are inevitable

Key challenges include rising global political shifts, nuclear issues and energy

Adversaries will try to test the boundaries of a new Democratic president

Even when successive presidents are from the same political party, such as the administrations of Ronald Reagan (1981-1989) and George Bush (1989-1993), American foreign policy contains elements of both continuity and change. If Kamala Harris succeeds Joe Biden as the president of the United States in January 2025, this will also likely be the case. Even though Ms. Harris and Mr. Biden agree on the fundamental directions for foreign and security policy, adjustments are inevitable. In part, this is because presidents have to respond to the turmoil of the geopolitical environment. But it is also because presidents select their own senior staff and cabinet, and new key officials lead to shifts in priorities.

Applying core liberal principles

In terms of advisors, leaders and ideas, the presidencies of Barack Obama (2009-2017) and Joe Biden (2021-2025) were strongly aligned. The basic principles of American liberal policy will no doubt also apply to a Harris administration.

Engagement: Bill Clinton was the Democratic party’s first post-Cold War president. Mr. Clinton (1993-2001) was known for his “engagement and enlargement” policy, which embraced internationalism and supported the expansion of democratic regimes that complied with international norms. Although former President Obama, President Biden and Vice President Harris also promote the expansion and defense of democracy, engagement focuses on de-escalating conflicts with adversarial regimes such as Russia, China and Iran, seeking compromise whenever possible. Mr. Biden and Ms. Harris, for example, consistently argue that China should and must be a partner in implementing the global green transition. They were also open to engagement with Iran, and sought to find common ground with Tehran on supporting the cause of a Palestinian state. Despite current confrontations with China, Russia and Iran, a Harris administration would likely look for opportunities to cooperate with all three.

Incrementalism: Mr. Obama, Mr. Biden and Ms. Harris all favor policies that call for the restrained use of force, and prefer non-military means to advance national interests. Their preference is to take an incrementalist approach and to use the minimum amount of coercion necessary to achieve desired outcomes. This was reflected, for instance, in the Biden administration’s measured efforts to deter Russia from attacking Ukraine, which began with a series of diplomatic measures and threats of economic sanction. The U.S. response only became more robust after it became clear that deterrence had failed.

Globalism and liberalism: Without question, Democratic leaders believe in a structural approach to foreign policy, which holds that establishing international norms and institutions is key to managing state behavior. They also believe in established practices such as traditional foreign aid as important instruments for international cooperation and global governance. For instance, the Biden-Harris administration remains committed to the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) despite the spiraling controversies surrounding the agency since the outbreak of Palestinian violence on October 7 and the Israeli response.

Future challenges

Although the playbook of American liberal governance is well established, all presidents have to adapt to the reality on the ground. Here are the most significant challenges a Democratic president would face.

Rise of global conservativism: European populists and the growing strength of the center-right and conservatives in Europe is not a passing phase, but an increasingly important political force. President Harris would likely not be able to count on a preponderance of European voices sharing her liberal views toward foreign policy. The European Union will increasingly struggle to speak with one voice. The European landscape will look less and less like a place where the U.S. can rely on a “one-stop shop” to coordinate with Europe. This will also be true of the G7. President Harris would engage with leaders who are not like-minded on a range of issues, from migration to economic matters.

Nuclear policy: In the near term, the next U.S. president will face nuclear parity with Russia and China, and a possible nuclear breakout from Iran. The space competition is accelerating, and demands for missile defense will increase. Former President Obama entered office advocating for a “road to nuclear zero” and opposing nuclear modernization. The realities of nuclear competition and extended deterrence could force a Harris administration to completely abandon Democratic orthodoxies on this issue. In addition, the Biden strategy of “integrated” deterrence will likely prove completely inadequate and in need of revision.

Antisemitism and anti-Zionism: The tensions between support for the Palestinians and traditional Democratic support for combating antisemitism and anti-Zionism are creating enormous tensions within the Democratic party. How a Harris administration would address this challenge will greatly affect both future domestic politics and U.S. security and foreign policy.

Economy: The Biden-Harris policy of promoting growth through government spending and higher taxes could well be seen as completely unrealistic by 2025. After promising voters lower inflation and better conditions for the middle and working classes, Ms. Harris will find few traditional liberal policies that can deliver on this promise. Further, the Biden administration has imposed more tariffs and sanctions than the Trump administration and has not completed a single free trade agreement. This will make it difficult to champion free-market policies.

Climate and energy policy: No aspect of liberal governance has achieved a more definitive consensus than the commitment to a green transition agenda and net-zero goals. Yet, these policies are being increasingly questioned around the world, from developed countries with lagging growth to developing countries mired in energy poverty. The liberal orthodoxy might prove unsustainable. Ms. Harris has already claimed she no longer supports banning fracking.

Latin America and immigration: Nowhere has the Democratic policy of engagement and alignment failed more significantly than in Latin America, where the U.S. faces the expanding influence of China, Russia and Iran as well as international criminal and terrorist networks. The illegal population of the U.S. increased under the Biden-Harris administration, and human trafficking from Asia, the Middle East and Africa increased significantly. The chances of a future administration addressing the issue by having Congress approve a mass amnesty are near zero.

Africa: Africa is undergoing a demographic boom. Within decades Africa will have the youngest population in the world, adding an additional half billion people. Current U.S. policies that rely on traditional instruments and often press Africans to adopt liberal values regarding family, life and gender, are not adequately addressing Africa’s need for growth, security and political stability. A Harris administration would have to face the consequences of this shortcoming, among them dwindling U.S. influence in the region.

Iran: The current Democratic policy toward Iran appears unsustainable. In addition to failing to ameliorate U.S.-Iran relations, constrain Iran’s surrogates or stem the regime’s nuclear weapons program, several individuals among the Biden-Harris staff are currently accused of being sympathetic to or even working for Tehran. The case of Robert Malley, the suspended U.S. Special Representative for Iran, is only the most noteworthy.

Scenarios

Most likely: Continuity at first and tests of leadership

If Ms. Harris is elected, her administration will initially seek continuity with President Biden in most regards. Much will depend on the composition of the senior policy advisors and cabinet ministers, which will take months to work itself out. This will be a new team under a new leader, facing very different challenges than those present in 2020.

Friends and adversaries will challenge and test the administration. While they know well what to expect from American liberal governance, they do not know what to expect from Ms. Harris as president. Her level of character, competence and decision-making will be an open question. There will likely be deliberate tests of her leadership. Since traditionally liberal governance adopts a restrained and incremental approach to crisis, many actors will be less risk averse in testing a Harris administration.

Source: GIS

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Energy

Biogas has gained popularity in recent years as yet another source of renewable energy next to hydro, solar and wind. It is produced from the decomposition of organic matter, such as agricultural or urban waste residues, which can then be used to replace conventional natural gas. As the share of biogas and biomethane in the world energy supply is less than 1%, their potential remains largely untapped.

What is biogas?

When organic matter breaks down with the help of bacteria, methane and carbon dioxide are released in the process. Carbon dioxide can then be removed, which leads to the production of biomethane, an upgraded form of biogas, consisting of almost 100% methane. Biomethane is considered a “green gas” or “renewable gas,” since it is a 100% renewable fuel. As Figure 1 shows, biomethane can be injected into and transported via natural gas pipelines. This means that no additional investment is needed to develop new infrastructure since the existing gas infrastructure can be used to transport biomethane.

Biogas – An Untapped Source of Renewable Energy_1

Benefits of biogas

Solar and wind power are intermittent sources of energy since they depend on the availability of sunlight and wind to generate power. Batteries can partially offset these limitations, but only for a few hours. In contrast, biomethane can serve as a baseload fuel, overcoming the limitations of intermittent renewable power generation systems, as electricity generated from biomethane is available 24 hours a day.

There are many benefits of biogas. Off-grid and on-site energy production reduces the dependence on transmission grids. Biogas can be used to fuel district heating through combined heat and power generation. There is an environmental benefit of biomethane as well. It can contribute to mitigating climate change and help reduce methane emissions, one of the most harmful greenhouse gases (GHG), in accordance with COP26 Methane Pledge. What is more, biogas can enable the circular economy by reducing resource use. Using digestate, a by-product of biogas, as natural fertilizer it can contribute to food security.

Opportunities and challenges

The scale of biogas and biomethane projects varies. In emerging economies, biogas production largely stems from small-scale plants often situated in rural settings. Despite the potential from agricultural crop residues in many developing countries, access to technology and fiscal incentives have constrained larger scale biogas production. This contrasts with developed countries, where larger biogas plants generate electricity and heat from agricultural and urban waste.

Similar to other renewable energy projects, one of the challenges in implementing biogas solutions is social acceptance, currently considered one of the main non-technical barriers to the successful implementation of site-specific biogas projects. Research has shown that lack of support from local communities, including local decision makers, stakeholders, and citizens, may jeopardize the outcomes of energy projects that are otherwise deemed technically and economically feasible. Identification of non-technical factors and an appropriate communication strategy are therefore vital to alleviate the public perception risk.

Historically, the main challenges for biogas projects stemmed from competing with other renewable technologies on a levelized cost of electricity (LCOE), as Figure 2 shows for Germany. Biogas ranked behind solar and wind in the merit order of electricity dispatch in 2021. The example of Germany highlights the role of changes in subsidies for biogas plants fueled by energy crops with a major cut in subsidies in 2014 because of the effects on agricultural land use and the introduction of a tendering system in 2017. Yet government incentives have changed over time, which turned biogas production into an increasingly attractive investment opportunity for utilities and industries.

Biogas – An Untapped Source of Renewable Energy_2

In the EU, grants from the European Green Deal (2019), Renewable Energy Directives (2018 and 2023), Fit for 55 (2021), and REPowerEU Plan (2022) support investments in biogas and biomethane. Similarly in the US, entities investing in biogas projects qualify for investment tax credits (ITC) under the Inflation Reduction Act (IRA) (2022). According to the EurObserv’ER’s projections, electricity produced from biogas in the eurozone will increase from 58.7 TWh in 2022 to 80 TWh by 2030. In the US, ample availability of natural gas at low production costs makes it more difficult to achieve growth rates similar to those in Europe in the medium term.

A recent announcement of a long-term Biomethane Purchase Agreement (BPA) between a French utility and a German chemical company illustrates this opportunity. The chemical company would be able to offer products with zero carbon footprint, which could be used across numerous industries such as automotive, detergents, textiles, and woodworking. In the US, renewable natural gas (RNG) projects enable the processing of biogas collected from landfills. Part of it is then used to fuel heavy-duty vehicles, which helps displace fossil fuels and avoid GHG emissions. This leads us to believe that biomethane is an important enabler of circular economy, contributing to a positive environmental impact over the life cycle of sustainable products.

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What to Expect if Kamala Harris Becomes President

In a nutshell

Applying core liberal principles

Future challenges

Scenarios

Source: GIS

Biogas – An Untapped Source of Renewable Energy

What is biogas?

Benefits of biogas

Opportunities and challenges

Risk Disclosure