As the second U.S. financial quarter came to an end, the results revealed a volatile global market. The ‘Fear Index’ (VIX), a popular measure of the stock market’s volatility, jumped up by 81%. Research by energy asset management company, Kaiserwetter, suggests that investors need to move away from traditional investments like gold and crude oil, instead looking to the innovative renewable sector, which provides more growth potential and longevity in the current unpredictable financial climate.
Gold has historically been the most reliable investment, as the precious metal reached record value highs in 2011, with gold priced at USD $58,546/kg. In more recent years, technology companies have been driving revenue and capturing investors’ interest. However, even tech giants such as the FAANGs (Facebook, Amazon, Apple, Netflix, and Google), who experienced a strong second quarter and revenue growth, have investors concerned.
This is partially due to growing fears over ethical practices and data use, rising costs, and regulation, such the General Data Protection Regulation. The new regulation came into effect last week.
The 5.2% drop in the S&P 500 Information Technology Index perhaps offers the first glimpse of the tech bubble bursting. In fact, almost USD $2.3 trillion was wiped from stocks by the end of the second quarter. The S&P 500 experienced many changes, with the index either gaining or losing 1% in value over a day, happening more than 20 times in total. This was a stark change in comparison to the same time period in 2016 and 2017.
“Renewable energy is on market level, and the world continues to utilize sustainable energy sources. Last year 157 gigawatts of renewable power was installed, more than double the 70 GW of fossil-fuel capacity added in the same period,” said CEO of Kaiserwetter, Hanno Schoklitsch. “Digital platforms, such as ARISTOTELES, are able to secure financial investments and continue the growth trajectory of renewable, which are predicted to achieve a 36% share of renewable energy in the global energy mix by 2030, which would increase GDP by up to roughly $1.3 trillion.”
The renewable energy sector also proved to be adept at shaking off the effects of the U.S. tariffs on China, implemented in April. These tariffs placed on over 1000 Chinese-produced products, as well as a punitive 25% tariff on steel and aluminum, led to a 2.3% drop in the S&P 500 and a 2.74% fall in the Nasdaq following the announcement. However, renewable energy shares, namely the Dow Jones Renewable Energy Equipment index, remained stable and even grew 3.23% in the following period, showing the resilience of the renewable energy market, even in a turbulent investment climate. Whilst these tariffs have since been put ‘on hold’ by both countries, this latest agreement remains vulnerable.
Fossil fuel is another sector highly susceptible to political changes, which recently took another hit. The U.S. withdrew from the JCPOA (Joint Comprehensive Plan of Action), the Iran nuclear deal, and has reinstated heavy sanctions on the Iranian nuclear industry, as well as sanctions on all Iran’s trade partners; which primarily focus on oil. Within 24 hours of the U.S. announcement, the price of Brent crude oil rose by 3% to USD $76.95 per barrel. Brent crude, the international benchmark, hit USD $80 per barrel on the 17th May for the first time since 2014 and is continuing to be vulnerable to market changes.
This cost jump was due to fears that Iran will be forced to restrict their oil supply, as a result of limited international trade options.In anticipation of actions like these, high levels of uncertainty caused dramatic market changes, as is shown in the Bloomberg Commodity Total Return Index, which fluctuated between 161 and 185.5 within the last year alone (2017-2018), demonstrating the volatility of traditional commodities.
Renewable energy is going from strength to strength, and exhibits positive growth within the energy sector. Renewables are on market level and are able to compete without the aid of government subsidies. Attracted by longevity and steady returns, heavyweight investment corporations are capitalizing on the potential of renewables. Within the last year, the world’s largest asset manager, BlackRock Inc. has reserved a USD $1.6 billion dollar fund for renewable energy assets, and at least half of this sum has already been invested in renewables. BlackRock’s return on investment in renewables during the last year has reached 10.83%.
A recent UN report reveals the world’s governments are also banking more and more on renewables and moving away from traditional investments like gold, making solar and other renewables far more attractive investment options than risky sectors such as fossil fuels, which are more susceptible to political and environmental changes.
The second U.S. financial quarter revealed a volatile market and unstable climate for investors. Traditional safe bets, such as gold, no longer provide the growth potential and longevity offered by renewables, upon which our world will inevitably rely. The renewable energy investment market remains secure and unaffected by the pitfalls of market shares, as well as shaking off interest-rate hikes and looming concerns over inflation.
Aided by the Enertec industry and companies such as Kaiserwetter, renewable energy investors can avoid the risks and volatility associated with traditional investment options. New technology such as the digital platform ARISTOLELES revolutionizes investments in renewable energies using the possibility of the Internet of Things (IoT), Big Data and Smart Data analytics. Kaiserwetter harnesses this technology and enables investors in the energy sector to maximize return on investment and minimize the risks of renewable energy investments.