When Big Tech Puts the Old Economy to Work

Big Tech Puts the Old Economy to Work: far from a sterile world, data centers smell of dust and diesel

The commonly held image of a data center is that of grey or white rooms packed with IT and telecom equipment, seemingly operating almost autonomously with minimal human presence. In reality, a functioning data center does indeed look much like this.

Before the white room: the construction site

Yet another reality lies behind this image: one of massive construction works that can be likened to large-scale public infrastructure projects. We typically associate public works with major infrastructure developments commissioned by state or local authorities — roads, sanitation systems, railways, utilities networks, and many others.

At first glance, the construction of a data center does not fundamentally differ from such large infrastructure projects, except for one key aspect: financing. The exceptionally deep pockets of major technology players allow them to undertake these colossal investments through their vast cash-flow generation and borrowing capacity, without recourse to public funds. This represents a fundamental shift in the traditionally accepted order: private companies, through data center projects, are now commissioning a wide range of private and public contractors, whereas historically it was public-sector contracts that engaged both private and public stakeholders.

To simplify, when a technology leader embarks on the construction of a data center, the process begins with surveyors, geotechnical and environmental engineering firms, lawyers, energy consultants and architects. This is followed by project managers, inspection bodies, safety authorities and notaries. Then come the main construction phases: earthworks, civil engineering, structural works, secondary works and technical trades — excavation, foundations, steel structures, waterproofing, electrical systems, generators, cooling, fire detection, cabling and fiber optics. The list is extensive.

Insatiable energy needs

Even before a single server or IT component is installed, a data center will already have generated significant activity for players from the “old economy.” Once operational, this contribution continues. Electricity consumption — regardless of its source — is an obvious necessity, as the reliability of energy supply is the top priority for any data center. The requirements of these giants (often exceeding 200,000 square meters) are immense, typically around 100 MW or more, and must be met without fail.

Unexpected partners

Several companies that might seem unlikely beneficiaries of IT-related projects are now enjoying strong tailwinds. Utilities are one example, as are manufacturers of HVAC (Heating, Ventilation and Air Conditioning) systems. But let us focus on a more surprising case: Cummins, a U.S. specialist in heavy-duty engines (for agricultural and mining equipment, trucks, ships and generators), a company in which NS Partners has been invested for many years.

While Cummins benefits indirectly from data center construction through engines used in construction and mining equipment, it is a very direct beneficiary of the critical need for highly reliable backup generators. Cummins — like Caterpillar — has decades of operational history in this type of engine technology, allowing it to offer immediate, time-tested solutions. For mechanical enthusiasts: the backup generator is a 95-liter diesel engine, capable of starting in under 20 seconds and delivering continuous power of 2.5 MW.

The acceleration in data center construction has therefore very likely contributed significantly to the company’s remarkable share price performance (+115%) over the past two years, even though it remains, in essence, an indirect player.

A trickle-down effect benefiting the entire economy

Cummins is not an isolated case. It illustrates the highly virtuous trickle-down effect that the current data center investment cycle is having on the real economy. Moreover, at this stage, financing does not appear to be a constraint, given the colossal resources available to technology giants to pursue their ambitions.

While major global equity indices may look expensive today, they are nonetheless supported by a productive investment cycle whose effects extend far beyond the technology sector — and crucially, without reliance on public funding. This is something to welcome.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group

Metals: the transition faces its limits

The depletion of deposits and the explosion in demand make the energy transition equation almost impossible to solve.

An increasingly voracious appetite for energy

Energy adaptation requires a dramatic increase in the consumption of base metals. Copper, zinc, nickel and cobalt are the invisible pillars of contemporary technologies such as electric vehicles, wind turbines, solar panels, smart grid infrastructure and the massive data centres needed to deploy artificial intelligence. The latter, whose rapid growth requires exponential computing power, is driving global electricity demand to unprecedented heights. Yet, at the very moment when humanity needs it most, the mining industry faces a devastating paradox: deposits are becoming depleted while demand is skyrocketing.

Deposits that are inexorably becoming depleted

The data illustrates the scale of the challenge. For example, the average copper content of mines in Chile, the world’s leading producer, has fallen from 1% in the 1990s to around 0.6% today. This deterioration means that almost twice as much rock now has to be crushed to extract a tonne of red metal.
The phenomenon affects all strategic metals. Indonesian nickel mines now exploit low-grade laterites, while African cobalt deposits present increasing geological complexities. This deterioration is not cyclical, but structural: humanity naturally began by exploiting the richest and most accessible deposits and now has to work harder for poorer results.

New mines, an illusory solution

Faced with this reality, opening new mines seems to be the most obvious solution. In theory, the Earth’s crust contains enough metals to last for several centuries, and exploration technologies make it possible to identify deposits that are deep or located in previously inaccessible areas.
Several flagship projects, from the Kamoa-Kakula mine in the Democratic Republic of Congo to the Andean copper and nickel deposits in New Caledonia, promise massive production.

But the operational reality is quite different: it takes an average of more than fifteen years between the discovery of a deposit and its entry into production. In fact, geological studies, environmental assessments, negotiations with local communities and initial investments (often running into billions of dollars) slow down the process considerably. Fifteen years to meet an urgent need: that is the paradox of industrial planning.

When society says no to mining

Furthermore, mining development is increasingly facing social and environmental resistance. Local populations oppose projects that threaten their water resources, agricultural land or cultural sites. Indeed, the communities concerned often prefer drinking water to promises of economic development.
As a result, the Tía María project in Peru, the Pebble project in Alaska and the Montagne d’Or project in French Guiana have all been blocked by citizen protests. In addition, regulatory requirements are becoming stricter, imposing more stringent standards for effluent treatment and waste management. These legitimate constraints increase costs and lengthen lead times.

Energy, the Achilles heel of mining production

Mining already accounts for around 8% of global energy consumption. And this proportion is increasing as ore grades decline, because processing twice as much ore requires twice as much energy.

Some estimates suggest that the energy cost of copper production could double by 2040, undermining some of the climate benefits of transport electrification.
Ironically, we are consuming more energy to produce the metals that are supposed to free us from it.

Innovation and recycling as safety valves

Fortunately, artificial intelligence is now improving the accuracy of geological exploration. In addition, in situ leaching processes are reducing the need for excavation, while recycling is advancing, with recovery rates approaching 50% for copper.

The circular economy could therefore provide up to 30% of the future supply of certain critical metals. But we must be clear-headed: even combining these advances, supply will remain below rapidly growing demand.

Changing the paradigm

Clearly, the development of new mines, although essential, will not be enough to offset the continuing decline in mineral grades and the exponential increase in demand.

This impasse therefore requires a complete overhaul of our relationship with resources, demanding greater restraint in product design, longer product lifespans and increased standardisation to promote recycling.

Energy adaptation cannot be achieved without a parallel transition to a truly regenerative economy, where the exploitation of virgin resources becomes the exception rather than the norm.

The challenge remains to convince a civilisation based on perpetual growth to embrace voluntary moderation.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group

How to navigate the credit crisis?

Credit crisis?

Three years after interest rates started rising, credit accidents are multiplying. How should one position themselves in this context?

The First Cracks in the U.S. Economy

Last September, three years after the FED began its remarkable rate-hiking cycle, the first cracks began to appear in the wall of the American economy. Tricolore and First Brands suddenly filed for bankruptcy, resulting in hundreds of millions, if not billions, of dollars in losses for their creditors. Among them were major investors, including JP Morgan, whose CEO Jamie Dimon made headlines with a viral metaphor: “When you see one cockroach, there are probably more,” referring to the recent developments in the credit space.

In October, it was the turn of two regional banks (Zions Bancorp and Western Alliance Bancorp) to fall victim to potential fraud in the commercial mortgage market. While losses for these two institutions amount to “only” tens of millions of dollars, the impact is more significant given the small size of their balance sheets.
Following these seemingly isolated cases, confidence in the financial system was severely tested, with a combined USD100 billion drop in market capitalization among the country’s 74 largest banks, signaling a potential upcoming economic slowdown.

Risks to Avoid Amid Economic Slowdown

The private credit market, which has seen phenomenal enthusiasm in recent years, was quickly blamed. It is true that its recent success stirs up envy and some indulge in a bit of “Schadenfreude,” prematurely celebrating its setbacks. But in this space, not all managers are created equal. While some big names in the sector are facing significant losses, other players have so far remained unscathed.

In such a context, extreme diligence in selecting a private credit manager is crucial, as performance differences between the top and bottom quartiles can be significant. It is particularly important to favor the most experienced managers, those who have been through several credit cycles, over those who have merely ridden the wave of this asset class in recent years. And when one is not able to do this themselves, it’s essential to rely on a firm that knows how to identify the best talent in the field.

For example, the best managers are better able to distinguish between resilient issuers and those with a weaker credit profile due to over-indebtedness, business models at risk of disruption by artificial intelligence or other characteristics that may escape the less trained eye.

Opportunities and Alternatives to Conventional Credit

Though worrisome at first glance, these recent events may present tremendous opportunities. Long-short credit managers, for example, may be able to stand out. Again, rigorous manager selection is essential, especially given the high leverage levels inherent to this type of strategy.

For those wishing to avoid exposure to corporate and private credit altogether, there are still a few interesting alternatives offering similar returns with different types of risk. “Cat bonds” (catastrophe bonds), for example, provide total decorrelation from the credit market by being exposed instead to natural disasters such as hurricanes or earthquakes. Finally, local currency emerging market debt, after a stellar start to the year, continues to offer fabulous returns, thanks to high real interest rates and attractive fundamental valuations of local currencies against the dollar.

Thus, in today’s environment, manager selection remains a key factor but not the only one. The ability to identify alternatives to conventional credit and build diversified portfolios across different risk sources also plays a vital role.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group

Active Management: Turning Euphoria into Opportunity

Active Management: a driver of growth and a source of added value, Swiss industry deserves its place in investment portfolios.

Often seen as a service-driven economy, Switzerland in fact rests on a solid and diversified industrial base. Key sectors such as pharmaceuticals, chemicals, machinery, metalworking and electricity generation make up a robust export-oriented industrial ecosystem that plays a decisive role in the country’s wealth creation. In 2024, the secondary sector made up 24.7% of GDP, an unusually high figure for a developed economy, exceeding the European Union average.

A Remarkable Trajectory, Despite a Strong Franc
The Swiss franc, long considered a traditional safe-haven asset, has strengthened versus other major global currencies. In theory, this trend should undermine export competitiveness, yet it has not hindered the momentum of Swiss industry. In fact, over the past 15 years, Swiss industrial production has shown steady growth. In Q1 2025, it rose by +8.5% year-over-year. Even more striking, industrial output has grown by nearly 40% since 2010 despite the franc strengthening by over 25% relative to the euro. What explains such performance? Much of it lies in the structure of Swiss industry itself. The absence of a large automotive sector, combined with a focus on high value-added niches, gives Swiss industry greater resilience to external shocks and the ability to export specialized goods that continue to be in high demand globally.

Active Management in Swiss Industry

Switzerland Generates Far More Value Per Exported Unit than China
While China remains the world’s largest industrial producer by volume, Switzerland stands out through its much higher value-added intensity. In 2024, Switzerland’s per capita trade surplus was nearly 12 times higher than China’s. This momentum also sets Switzerland apart within Europe. Industrial growth here has been significantly more robust than in most major European economies, including Germany.

U.S. Trade Policy: Ongoing Uncertainty
In 2025, one of the key external risks remains the trade policy of the United States. Tariff measures announced by Donald Trump prompted many companies to bring forward deliveries into Q1, contributing to GDP growth for the period. In response to this uncertain climate, Swiss companies are adopting various adaptation strategies: price adjustments, partial reshoring of value chains, and geographic diversification, even as hopes persist for a bilateral agreement. Diplomatic pressure is mounting and drawing firm conclusions in such a fluid environment remains risky. However, Switzerland’s focus on differentiated products suggests the country will continue to adapt effectively.

A Strategic Long-Term Positioning
Despite international economic uncertainty, Swiss industry, driven by niche leaders, a culture of constant innovation and a highly skilled workforce makes a strong case for long-term strategic exposure in investment portfolios. Whether facing a strong franc or trade tensions with the U.S., Swiss firms are quick to adapt. Even in a context of global slowdown, Switzerland continues to maintain a healthy trade surplus. This reflects the structural resilience of its industrial model.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group

When Energy Enters Its Internet Era – Highlights from SPHERE PODIUM event in Geneva

During the recent SPHERE PODIUM GENEVA event on May 13, 2025, Pierre Mouton shared a thought-provoking perspective on the future of energy investing in his talk: When Energy Enters Its Internet Era.

Drawing parallels between the digital revolution and today’s energy transition, he explored how the DGC Energy Fund identifies profitable, high-quality companies driving structural change, without falling into the trap of speculative trends.

Watch the video from Pierre Mouton’s talk and discover why active management and disciplined fundamentals are more relevant than ever in the clean energy space.

US economy: landing at last?

At the beginning of the year, there were fears of a sharp slowdown, but the US economy has proved surprisingly resilient.

At the beginning of the year, US GDP growth for 2023 was forecast at 0.3% according to the Bloomberg consensus. The question was not whether the US economy would slow down, but rather whether its landing would be soft or hard. Interest rates had risen sharply and the yield curve had inverted. But the US economy proved these pessimistic forecasts wrong, surprising everyone with its robustness (see table below). Today, the consensus forecast is for GDP growth of 2.2% in 2023.

How could the market have been so wrong? Firstly, because consumption has remained very strong, thanks to additional post-Covid household savings and an unemployment rate that has remained very low. In addition, the US government stimulated the economy thanks to the various programs approved by the Biden administration in 2022, such as “The Chip Act” and “The Inflation Reduction Act”. These two major forces offset the negative impact of rising interest rates. Indeed, the FED cited the strength of the US economy as one of the reasons for persistently high interest rates.

And what happens now?

But that’s in the past. Let’s look to the future. On the consumption side, households have used up all the extra savings accumulated during the Covid. What’s more, students began repaying their loans in October, which could further reduce their purchasing power. Lastly, rising interest rates are likely to have an impact on purchases of durable goods. As for the Government, the situation has also changed. The House of Representatives is now controlled by the Republicans, who are seeking to force the Biden administration to cut spending. We may also see government shutdowns if Congress and the White House fail to pass the legislation needed to raise the debt ceiling. According to Goldman Sachs, each week of government shutdown could reduce GDP growth by 0.2%. Finally, the “bond vigilantes” continue to put pressure on the government to spend less.

In view of these factors, our outlook for US GDP growth over the next three quarters could be similar, if not a little more pessimistic. In fact, we expect a significant slowdown over the next few quarters. But this time, we think the US economy is ready for a landing, probably a soft one.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.

© NS Partners Group

SMI companies stand out for their ESG commitment

The SMI has been awarded the highest rating of AAA by MSCI ESG Ratings. The 20 components of the index have ratings ranging from A to AAA.

Investors are paying increasing attention to environmental, social and governance (ESG) criteria when making investment decisions. They are also motivated by the various regulations in force and pressing issues such as climate change. For their part, companies now recognise the fundamental importance of sustainability and issue reports to demonstrate their commitment to it.

WHAT IS THE SITUATION IN SWITZERLAND?
Switzerland is fully committed to the Paris Agreement, whose central objective is to limit global warming to less than 2°C above pre-industrial levels, with the aspiration of limiting the increase to 1.5°C. Our country is determined to reduce its greenhouse gas emissions, while strengthening its resilience to the consequences of climate change. Switzerland’s ambition is to achieve carbon neutrality by 2050. Switzerland’s main source of renewable energy is hydropower, which is favoured by its mountainous terrain and the presence of numerous rivers. In fact, in 2022, 53% of our total electricity production will come from hydropower. This makes a significant contribution to the production of electricity without greenhouse gas emissions. However, the growth of this source is now reaching a limit, prompting Switzerland to promote the use of other forms of renewable energy such as solar and wind power, which are constantly expanding.

INTEGRATION OF ESG CRITERIA BY SWISS COMPANIES
Sustainability and corporate social responsibility issues are increasingly important in the governance of SMI (Swiss Market Index) companies, which are encouraged to adopt sustainable business practices. At the same time, Switzerland generally enjoys an excellent reputation for corporate governance.

The integration of ESG criteria is therefore becoming increasingly important in Switzerland. Companies are increasingly recognising the importance of disclosing ESG data, not only to meet investor expectations, but also to ensure sustainable and responsible management.

Looking at the 20 largest companies on the SMI, the flagships of the stock market, it is notable that each of them provides a detailed sustainability report, either as part of their annual report or independently. These companies have set targets, particularly for carbon neutrality, with deadlines ranging from 2025 to 2050. In addition, most of them are committed to the 17 United Nations Sustainable Development Goals (SDGs) and have signed up to the 10 Principles of the UN Global Compact, which encourages companies to adopt responsible and sustainable business practices.

The approach to sustainability is transparent and proprietary within these companies, with a focus on gender equality and reducing their environmental impact.

ESG ASSESSMENT OF SWISS COMPANIES
The composition of the SMI gives it a rating of AAA, the highest according to MSCI ESG Ratings. The 20 components of the index have ratings ranging from A to AAA, putting the index at the top of the MSCI universe. Most of these companies are leaders in terms of ESG criteria in their respective industries. As for carbon emissions, these depend on the sector, with Holcim and Nestlé the biggest emitters, and Sonova and Partners Group the smallest. For the vast majority of SMI companies, there has also been a significant improvement in governance or solidity. If we broaden our analysis to include criteria such as controversies, recent developments and the ability to rank in the top quartile of their industry in terms of the three pillars E, S and G, we can see that Novartis, Givaudan, Kuehne + Nagel and Zurich Insurance seem to stand out in particular.

We can therefore conclude that the Swiss companies in the SMI stand out for their remarkable commitment to sustainability and corporate social responsibility. This approach reinforces Switzerland’s reputation as an investment destination of choice. Over the last 5 years, the SMI has outperformed the global market (MSCI World Index in CHF) by 543 basis points.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.

Towards a slowdown in the US economy at the end of the year

At present, the US economy appears to be in good health: growth is approaching 2%, core and underlying inflation are falling, unemployment is low and oil and petrol prices are lower than this time last year. What’s more, corporate profits are starting to rise and artificial intelligence could lead to an unprecedented increase in productivity. However, there are some challenges on the horizon.

A few clouds in a blue sky
The Core PCE, the inflation indicator favoured by the Federal Reserve (FED), presents a major challenge. Despite a target of 2%, this index is still at a worrying level of 4.6%. In order to rectify the situation, the FED is considering raising rates one or two more times this year, which could hamper economic growth and investment.
Another potential slowing factor is the exhaustion of the surplus savings accumulated during and after the Covid-19 pandemic. According to several estimates, this surplus savings could dry up by the fourth quarter of 2023, considerably limiting the support that consumers provide to the economy.
Admittedly, after two disappointing seasons in 2020 and 2021, the tourism sector rebounded in 2022 and 2023 thanks to the desire of American families for holidays. However, this momentum is expected to run out around September-October this year, marking the end of the peak tourist season.
Another worrying phenomenon is the clear inversion of the US yield curve. Historically, this phenomenon has always been a precursor to recession or a period of virtually zero growth. Monetary policy, which operates with a certain time lag, could therefore begin to reflect this economic reality in the months ahead.
In addition, the US government is facing a substantial budget deficit, exceeding 5.5% by 2023. Maintaining this level of public spending is unsustainable for the country’s economy.
As a result, the valuation of the US stock market is starting to look a little high, at around 19 times projected earnings for 2024. However, investors do not seem to be worried about the economic situation.

A similar situation in Europe
Although we have mainly been talking about the US, similar observations can be made for the European economy, including the UK, except that company valuations in Europe are more moderate than in the US.

Given these factors, it seems likely that we will see a significant slowdown in the economy between now and the fourth quarter of 2023, which could go as far as a moderate recession or very weak growth of around 0.5%. Against this backdrop, defensive growth sectors (such as healthcare and staples), as well as quality investment bonds with maturities of 3 to 5 years, appear to be wise choices.
It’s a good time to take a break, just like the summer break we’re all taking.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request. © NS Partners Group

Energy Transition: What can you do during this particularly hot summer?

Energy Transition

What can you do during this particularly hot summer?

Even if growth slows down, the theme of energy transition has plenty to appeal to investors.

Squaring the circle

Growth in the global economy remains modest and, with rising interest rates, is set to slow in the US, Europe and Asia. Against this backdrop, equities in growth sectors should be good investments, but their valuations are already demanding. Admittedly, there are some value sectors that benefit from very attractive valuations, such as oil companies and banks, but these two sectors are experiencing structural problems over the long term.

What’s more, although most investors support responsible investment, the world is still very polarised on the subject, and not everyone agrees to subject their investments to sustainability constraints.

So is it possible to find an investment theme that combines growth with reasonable valuations? Can we find investments that will be attractive to both ESG and non-ESG supporters? The answer is YES, with companies involved in the much-touted energy transition.

A topic on which everyone agrees

This is a very cross-cutting theme, bringing together the main companies involved in the energy transition. It is not replicable through a specific index, which requires good active management. Let’s summarise the most important sub-themes that will be present over the next 30 years:

Solar panel manufacturing, for large-scale operations or small rooftop installations. These investments include solar panels, inverters and batteries to store excess energy.
Manufacture of wind turbines for onshore and offshore installations. In conjunction with these, rare earth metals and copper will be widely used.
Nuclear power: Although nuclear power has its detractors, the fact remains that it is a continuous source of energy that compensates for the intermittent nature of solar and wind power generation and emits no CO2. A new group of mini-reactors should be available for industrial use by the end of the decade, which will increase demand for uranium.
Electric vehicles and their value chain: car manufacturers, chargers, battery manufacturers, rare earth metal miners, copper miners.
Energy savings, thanks to the use of better insulating materials and electrical equipment that optimises the energy consumed in households and businesses.
Producers of hydrogen, which will be used to produce green steel, cement and ammonia. We need electrolysers and fuel cells. Hydrogen will also be used to produce ammonia for fertilisers and as fuel for ships.
Carbon sequestration. In cases where it will be impossible to do without CO2-emitting fuels, carbon sequestration techniques will have to be used.
Companies that invest more and more money in non-CO2 emitting energies, whether for new investments or to replace existing installations that pollute, will be favoured.

United we stand

This summer, the film “Oppenheimer” was one of the box-office hits. It shows how, when the scientific community works together towards a very specific goal, it manages to achieve it quickly. More recently, this was also the case with the “Warp Speed” project, which succeeded in obtaining 2 vaccines against Covid-19 in less than 9 months. Meeting the “energy transition” challenge will be possible thanks to the efforts of the global scientific community, supported by public and private investment.

In the meantime, we as investors have a wide range of themes and companies that make good investments at reasonable valuations and are capable of appealing to all groups of investors.

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.

Gráfico del verano – Una oportunidad de inversión de 3 billones de dólares para la transición energética

Una oportunidad de inversión de 3 billones de dólares para la transición energética

Muchos economistas se refieren a este cambio como “la nueva revolución industrial”. Un vistazo al gráfico presentado por la Agencia Internacional de la Energía (AIE) pone claramente de manifiesto el enorme esfuerzo inversor necesario en todo el mundo para descarbonizar la economía. Para visualizar esta oportunidad de inversión, nos embarcamos en un viaje imaginario en el que nuestra invitada descubrirá una serie de ideas y empresas interesantes en las que invertir.

Mary encendió su Tesla, una maravilla de la tecnología de los coches eléctricos conocida por su diseño ecológico. El salpicadero digital se iluminó, indicando un nivel de carga de la batería del setenta y cinco por ciento. Mary admiró su vehículo, no sólo por su conducción rápida y silenciosa, sino también por lo que simbolizaba: un paso hacia el cuidado del medio ambiente.

La acompañaba su copiloto, un recién licenciado en química. Juntos, admiraron la vista de los altísimos molinos de viento que salpicaban el paisaje. Eran molinos Vestas, famosos por su eficacia para transformar la energía eólica en electricidad limpia. El copiloto observó que los motores y rotores de estos molinos, al igual que los de su Tesla, dependían de elementos de tierras raras debido a sus propiedades magnéticas únicas.

Su viaje los llevó junto a campos repletos de paneles solares de First Solar, Canadian Solar y otros fabricantes. Estas granjas solares, gestionadas por Iberdrola, captaban la luz del sol y la transformaban en energía. En medio de estas granjas había electrolizadores, que utilizaban la electricidad para separar el agua en hidrógeno y oxígeno. Este hidrógeno se almacenaba y posteriormente se utilizaba para crear amoníaco, un combustible limpio y potente. Parte de este hidrógeno se enviaba a una empresa siderúrgica que lo utilizaba para producir acero limpio.

Cerca de allí había una planta que utilizaba el amoníaco para fabricar fertilizantes, enriqueciendo el suelo para producir buenas cosechas. El amoníaco también se cargaba en los barcos, alimentando sus viajes por todo el mundo sin dejar tras de sí un rastro de contaminación.

Cuando el Tesla indicó que necesitaba una recarga, Mary se detuvo en una estación de carga cercana. La estación obtenía su energía de un compacto pero potente minirreactor nuclear de 200 MW. Su copiloto le explicó cómo el uranio, a pesar de su controvertida historia, era fundamental para estos reactores nucleares debido a su inmensa capacidad de producción de energía.

Al llegar a su moderna y ecológica casa en el campo, Mary pudo ver los paneles solares que adornaban el tejado. Conectados a eficientes inversores Enphase, estos paneles aprovechaban la luz solar y la convertían en electricidad. La energía sobrante se almacenaba en fiables baterías Samsung SDI, un componente crucial que requiere importantes cantidades de litio, un metal ligero pero de gran densidad energética.

La casa también estaba equipada con un sistema de bomba de calor Johnson Controls de última generación y un sistema doméstico inteligente Schneider, que proporcionaban no sólo confort sino también un uso eficiente de la energía.

Este viaje mostró varias ideas para aprovechar esta oportunidad de inversión de 3 billones de dólares. Estas oportunidades serán atractivas para los inversores ESG, los no ESG, los inversores en crecimiento y los inversores en valor. Tanto los países en desarrollo como los emergentes están invirtiendo en estas tecnologías, y las valoraciones actuales aún no reflejan el crecimiento previsto.

Embárquese en un viaje de inversión de 3 billones de dólares, ¡feliz inversión!

Los resultados pasados no implican resultados futuros. Las opiniones, estrategias e instrumentos financieros que se describen en el presente documento pueden no ser convenientes para todos los inversores. Las opiniones expresadas son sólo las del momento en la(s) fecha(s) que aparece(n) en este material. Las referencias a índices de mercado o compuestos, índices de referencia u otras medidas de resultados relativos de los mercados durante un período específico sólo se proveen a título informativo. NS Partners no garantiza ni es responsable de la exactitud o la integridad de las informaciones (datos financieros de mercado, precios de bolsa, resultados de investigación u otros instrumentos financieros) que se mencionan en este documento. El presente documento no constituye una oferta ni solicitud a ninguna persona ni jurisdicción donde tal oferta o solicitud no esté autorizada ni a ninguna persona a quien sería ilegal hacer dicha oferta o solicitud. Toda referencia en este documento a instrumentos específicos o a emisores sólo tiene una finalidad ilustrativa y no debe ser interpretada como una recomendación para la compra o venta de dicho instrumento. Las referencias en este documento a fondos de inversión se aplican a fondos que no han sido registrados por la Finma y que por lo tanto no pueden ser distribuidos en o desde suiza excepto a ciertas categorías de inversores. Algunas de las empresas del grupo NS Partners o sus clientes pueden tener posiciones en los instrumentos financieros de alguno de los emisores mencionados en este documento, o ser asesor de uno de ellos. Hay información adicional disponible a solicitud.