Falling Gas Prices, Corporate Campaign Donations & Money Market Rates
Like any year, 2023 has had its financial ups and downs:
- The S&P 500 gained 19% through the first 11 months but saw five losses of 4.75% or more.
- America’s credit card debt exceeded $1 trillion for the first time ever.
- Mortgage rates hit their highest level in 30 years.
- And short-term CDs offered their highest rates in 14 years.
Last week, Merriam-Webster chose “authentic” as the word of the year. But if we had a say, it’d be “ambiguous.”
So in light of 2023’s economic uncertainty, today we have three shorter stories about how you can better prepare for 2024.
Story #1: Gas Prices Fall 60 Consecutive Days
We’re in the midst of the longest stretch of falling gas prices in over a year. Crude oil is trading under $76/barrel, but that’s not devastating new for the oil majors.
There are two takeaways from this:
- Americans paying less at the pump are expected to use those savings to bolster holiday spending.
- This isn’t necessarily a bad thing for Big Oil, as it coincides with a natural correction after energy stocks surged in 2022 with the sector gaining 60%.
Americans are already passing along those gas savings. U.S. consumer spending, which makes up two-thirds of the U.S. economy, spent a record $9.8 billion online during Black Friday.
That’s good news for e-commerce stocks. And for knowledgeable long-term investors, it’s also good news for energy stocks. Cheap gas is good for Americans, but it’s also not going to derail oil and gas companies that are steadily increasing production and acquisitions.
This reminds us of Warren Buffett’s adage, “The stock market is the only place where things go on sale and all the customers run out of the store.”
This year, ExxonMobil (XOM) and Chevron (CVX) are down -1.93% and -16.59%, respectively. Wall Street Journal analysts give XOM an average one-year price target of $127.64 (currently trading at $104) and CVX a price target of $180.71 (currently trading at $144).
Insider buying supports this thesis. On Nov. 6, ExxonMobil director and ValueAct Capital hedge fund cofounder and chairman Jeffrey Ubben bought 250k shares of XOM for $26.49 million. Since July 31, Ubben’s purchased a total of 900k shares.
Story #2: United States of Corporations
Over the course of America’s 247-year history, “of the people, by the people, for the people” has given way to “of the corporations, by the corporations, for the corporations.”
This is evidenced time and time again, including:
- The 2008 bank bailout, which cost American taxpayers $700 billion.
- Supreme Court rulings like 2010’s Citizens United, which reversed century-old campaign finance restrictions and enabled corporations to spend unlimited money on elections.
- And the G.W. Bush and Trump corporate tax cuts, which contributed one-third (or $500 billion) to the national deficit.
Now, a handful of people are trying to do something about it.
A bill’s been proposed that would ban corporate campaign donations and effectively end runaway campaign spending, which has surged ~300% since the passing of Citizens United.
The bill has bipartisan support among voters, but don’t get your hopes up.
When it comes to issues voters on the left and right agree on — like comprehensive firearm background checks and the preservation of Social Security — our morally deficient elected representatives simply don’t care.
That’s because lawmaking is a cyclical process that Americans don’t pay for:
- Corporate stocks rise, increasing free cash slow.
- Lobbyists fund campaigns on both sides of the aisle.
- Winning candidates owe corporate donors friendly legislation (which lobbyists themselves often write).
- Laws are passed to aid and abet increases in corporate earnings.
Lather. Rinse. Repeat.
It’s a lesson never taught in civics classes, but by adulthood, we should have it figured out.
So what does this mean for investing in 2024?
Follow the money. It’s not difficult. Sites like OpenSecrets, a nonprofit tracking money in politics, provides tools so you can research where corporate donors are throwing their cash.
In the first quarter of 2023 only, federal lobbying topped $1 billion, putting the yearly total on pace for over $4 billion.
Using recently ousted House Leader Kevin McCarthy as an example (we’re not playing left vs. right … he’s #1 on the recipient list), OpenSecrets shows his top donor as Apollo Global Management (APO), a New York-based private equity firm.
This year, APO’s stock is up 44%.
Scrolling down 10 spots on that list brings us to the first Democrat, Rep. Pete Aguilar, whose top donor is DaVita (DVA), a healthcare services company.
This year, DVA’s stock is up 33%.
Correlation doesn’t imply causation, but you get the picture.
Story #3: Money Market Rates
For those hesitant to deploy capital into equity markets, 2023 has been kind. The very same interest rate hikes that’ve crippled banking and the housing market have benefitted savers and conservative investors.
Treasurys, high-yields savings accounts (HYSAs), CDs and money markets have offered better-than-average yields.
However, while Treasurys and CDs tie your money up until the date of maturity, HYSAs and money market accounts allow you to access your funds penalty-free. Of the two, money market accounts tend to pay higher rates.
Money market accounts typically compound interest daily, and right now, banks are offering extremely attractive rates that can set the tone for your 2024 personal finance plan:
- Zynolo Bank: 5% APY, 1-cent minimum balance
- First Foundation Bank: 5.25% APY, 1-cent minimum balance
- Vio Bank: 5.3% APY, 1-cent minimum balance
Inflation’s been subsiding, but the Federal Reserve will continue raising rates if prices don’t come down fast enough. This should reward those with money market accounts, as high yields are likely to sustain throughout the Fed’s cycle.
TL;DR
The new year is fast-approaching. If you’re wondering where to safely deploy capital in 2024, looking at macrotrends in the energy sector, corporate political donations and conservative options like money market accounts can help you start off on the right foot.
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