Time to go Green

Macro Perspectives: Tue 23 Mar 2021

Last week was all about inflation and interest rates, as the Fed led a line up of central bank meetings. Despite the massive $1.9 trillion fiscal spend that began working its way through the U.S. economy, the Fed did its best to promote a subdued outlook for inflation.

That subdued inflation narrative sets the table for the next multi-trillion dollar spending blow-out from the Biden administration: the clean energy deal. This is being packaged as "infrastructure," but make no mistake, this is all about the climate action agenda (i.e. transforming the economy from fossil fuels to what they promote as more environmentally friendly).

This will be the dominant theme for markets, beginning this week.

There was already talk yesterday that the White House is preparing a bill for the House, in the amount of (another) $3 trillion. Add to that, the U.S. is set to meet with officials from the EU, China and Canada this week on the global climate change initiative. And the European Central Bank Chief is presenting a speech this week to high level European officials, titled "Investing in Climate Action - a make or break decade."

As we discussed heading into the U.S. election, the global climate action initiative has been clear and globally coordinated, involving the most powerful governments and companies in the world and the financial backing is nearly unlimited.

Remember, a group called Climate Action 100+, composed of the most powerful investors in the world (representing $32 trillion in assets under management), has dictated how major energy companies are deploying capital on new projects since, at least, 2017 - forcing the pivot to climate responsible initiatives. Every major global government entity/cooperative behind the activist movement has been feeding the effort with cash and subsidies.

Trump was an existential threat to this global initiative. No surprise, there were powerful forces at work to remove him. So we are two months into the new administration, and with an aligned Congress, the Climate Action agenda is (and will be) fully executed, with full extravagance.