via press release: MILLIONAIRE MATCHMAKER PATTI STANGER JOINS WE tv NEW YORK, NY – September 8, 2015 – The Millionaire Matchmaker, dating expert Patti Stanger has joined…
Now that the second quarter earnings season has passed and investors are looking forward to what the second half of the year holds, we are inspired to look even further to the horizon to see what themes may affect the markets in the coming years. Climate change stands out as a market force that could be shaping decisions for years to come.
Negotiations among nearly 200 countries are scheduled to resume at the end of August to produce an agreement to be signed at the United Nations Conference on Climate Change in Paris that begins November 30. President Obama has unveiled a major climate change plan this month as the U.S. and other nations are looking at new regulations that cut carbon emissions. The next major round of environmental regulations has the potential for broad effects on businesses. Whether policymakers get the broad political support to enact the plans or not, business leaders are increasingly embracing their own climate change mitigation and adaptation policies.
Because our research is focused on the financial markets and not on environmental science, we don’t debate the rights and wrongs of the science or proposed solutions. We focus on what matters to investors: the response of markets, sectors, and companies to the opportunities and risks posed by potential climate-change initiatives in the coming years.
Five potential global market impacts of climate change initiatives are:
1. Advantages for large-cap stocks over small-cap stocks. The marginal cost of adopting climate change initiatives for larger companies is lower than for small to medium-sized firms. The benefits of scale and global sourcing when implementing environmentally friendly packaging, fuels, raw materials, and processes are significant. Larger firms are better able to sustain start-up costs and leverage first-mover brand advantages.
2. Upward pressure on agricultural commodity prices. While the impact of technology and innovation to spur increased production and high quality yields of crops, produce, and livestock should not be underestimated, food commodity prices may rise, given the added costs of environmentally friendly cultivation. Any changes in weather patterns, water supply issues, or availability of grazing land may also impact supply and lift prices. Rising food prices could have a more negative impact on emerging market economies where food makes up a larger proportion of consumer spending.
3. Favorable influences for the industrial, information technology, and financial sectors. More stringent environmental standards work as a positive for companies that will be involved in producing more efficient and cleaner industrial equipment and technologies along with alternative energy solutions. Also, investment banks should benefit from new trading markets such as carbon emissions and weather futures.
4. Negative influences for consumer staples and utilities sectors along with the automobile industry. Higher agricultural input costs for ingredients such as cocoa, almonds, and sugar may negatively affect costs for producers of consumer products. In addition, companies may have to increase spending for environmentally friendly equipment and vehicles. The emerging markets are a key source of growth for beverage companies, but challenges to access clean water supplies may continue to crop up. With the highest proportion of costs attributed to energy of any industry, utilities are the most exposed to changing regulations on greenhouse gases. Automakers’ efforts to achieve higher standards for fuel efficiency come at a greater cost. In addition, the dominance of U.S. automakers in the larger, less fuel-efficient categories may act as a negative as they cede more market share to the generally smaller, more fuel-efficient vehicles of foreign automakers.
5. Higher potential inflation. Inflation may result as indirect costs formerly borne by the environment become incorporated into the direct costs of goods and services. The magnitude of rising prices and the offsetting forces are difficult to gauge. Rising global inflation pressures may be welcome at first, but, if sustained, may act as a negative for all financial assets. Rising inflation tends to be more negative for bonds, high-yielding global sectors of the stock market such as utilities and telecommunications services, and smaller caps.
There are an increasing number of investment solutions that incorporate climate change criteria. Also, the municipal bond market offers some exposure to environmentally friendly initiatives though so-called green bonds. It is important to keep in mind that climate change exposure should not be the sole reason for making any investment, especially since these initiatives remain in their early stage and are likely to have at most only a minor influence on the performance of the underlying companies. Also, investments opportunities focused purely on climate change tend to be small, single product companies that come with high risks. We will continue to actively monitor climate change initiatives as they develop for their potential impact on global markets.
Mike emailed: I recently lost my job. I am over 55 and have some money in my 401(k). Can I withdraw some of those funds each year for 5 years without penalty? I know I would have to pay taxes on the withdrawals. Is it an easy process or would I have to contact my financial advisor?
Withdrawals from your 401(k) or other qualified plan are taxed as ordinary income and may be subject to a 10% federal tax penalty if they’re taken before age 59 ½. But there are exceptions, of course. If you left your job before you turned 55, you could be eligible for the over-55 exemption to the 10% penalty – as long as the money is still in your 401(k). If you rolled it over into an IRA, you lose the exemption, says Jim Blankenship, CFP in New Berlin, Ill.
As part of our 20th anniversary, I’m excited to share that Yahoo has reclaimed the iconic billboard along San Francisco’s stretch of Interstate 80. The Yahoo billboard is back to surprise and delight Bay Area commuters with fun messages from the company and its employees. To celebrate Yahoo’s return to the space, for the first weekend the billboard’s inaugural message will read, “It’s good to be back.“ After that, the billboard will continue to reach commuters with different topical messages tied to Yahoo products, properties and local events that touch their lives. Now that construction is complete, we hope everyone finds a little extra brightness from Yahoo while on their journey each day.
