TheChek News Flow

Even as the state weathers a megadrought, climate change is increasing the risk of catastrophic floods.

On the morning of January 10, 1862, Leland Stanford, the industrialist and railroad magnate who would later lend his name to Stanford University, departed his mansion, in downtown Sacramento, en route to the state capitol building, about five blocks away. Stanford was preparing to be sworn in as the eighth governor of California. He had to abandon his grand plans to travel in style, via horse-drawn carriage, however. Sacramento lay under as much as eighteen feet of river water after the region’s second major flood in as many months. Weeks of downpour had caused the levees on the American River and the Sacramento River to breach. While residents fled in droves, the Governor-elect likely travelled to the capitol via rowboat. One can imagine the oars disappearing into the brown murk as the detritus of a ruined city drifted by.

By the time that Stanford had placed his hand on the Bible and floated home, the floodwaters had risen so high that he and his wife reëntered the mansion through a second-story window. “The scenes of horror . . . defy description,” a guest at Stanford’s inauguration later wrote. “Cracking, falling, floating houses; businessmen ruined in an hour; strong men struggling for life in the current of our streets. Many of all ages and both sexes clinging to houses and floodwood, shrieking in despair, some sinking in death, and flood still rising!” In the end, rain fell for more than forty days; the deluge stretched from Oregon to San Diego, and as far east as Utah and Arizona. Sacramento was underwater for months. The legislature and governor’s office temporarily moved to San Francisco. (The state Supreme Court moved there and never left.) Thousands of people are believed to have died. Even more cattle perished, and a drought followed, forcing the state to abandon much of its livestock economy in favor of crops.

The storms that have buffeted the state since December 31, 2022, evoke scenes from the great flood that afflicted Stanford’s inauguration. In recent days, gale-force winds toppled century-old trees onto cars and homes in Sacramento; ocean waves wiped out a portion of a pier at Capitola, in Santa Cruz County; rivers have exceeded their capacities, running over banks and into residential streets and homes. President Biden declared a state of emergency; tens of thousands of people have been displaced.

Meteorologists and climate scientists identify these recent tempests as atmospheric rivers—columns of vapor that worm through the atmosphere, carrying moisture from the tropics. In the air above the Pacific, atmospheric rivers can contain as much water as the Mississippi; when they expel their moisture in the form of rain and snow, they can leave death and destruction in their path. On Wednesday evening, only eleven days into 2023, atmospheric rivers had already claimed the lives of at least eighteen Californians. A two-year-old boy was struck by a falling tree in his house in Sonoma County; rescuers are still searching for a five-year-old boy swept away from a car by floodwaters in San Luis Obispo County.

The Great Flood of 1861-62 and its lessons had largely disappeared from public memory until 2010, when a study funded by state and federal agencies, dubbed ARkStorm—short for Atmospheric River thousand-year Storm—modelled a hypothetical weather event based in part on the great flood. (Though its name suggests that such an event happens every thousand years, the geologic record shows that it actually occurs every hundred to two hundred years.) At the time, the U.S. Geological Survey estimated that this storm—a when-not-if proposition—would inflict some seven hundred and twenty-five billion dollars in damage and economic loss.

Strangely, that broad, multi-agency study did not take climate change into account. In 2010, “climate was a pressing issue,” Karla Nemeth, who works under Governor Gavin Newsom as director of the California Department of Water Resources, told me, last summer. But, because fewer people had experienced life-threatening climate disasters then, funding research into climate change required a great deal of political will, Nemeth said. It was difficult to convince Californians that climate change could cause a deadly influx of surplus moisture, particularly during a years-long drought.

More recently, a research team co-led by Daniel Swain, a U.C.L.A climate scientist, has been updating the 2010 report to factor in human-caused climate change. So far, the results of ARkStorm 2.0 render the astonishing predictions of the original study twice as terrifying. “Climate change over the past century has doubled the risk of an extreme winter storm sequence capable of causing widespread, severe flooding,” Swain and his research partner wrote in a summary of their study, which was published in the journal Science Advances, last August. Even so, the scientists have struggled to sustain funding for their research. “I think there’s an interesting undercurrent of not wanting to know, because then you would actually have to deal with the problem,” Swain told me last year.

As California’s ongoing storms increasingly dominate headlines, leaders in Sacramento appear to now be acknowledging the threat. Earlier this week, Newsom proposed two hundred and two million dollars in funding for flood prevention in his 2023 budget, supplementing the seven hundred and thirty-eight million invested in flood-protection programs over the previous two years. Swain has seen renewed interest in his work. “I’m getting e-mails every week now from governmental entities wanting to talk about our storm,” he said, of ARkStorm 2.0. Swain has been speaking regularly with officials like Nemeth, who has supported ARkStorm research since its inception. “I think I scared her a little bit,” he told me. That fear may be what’s required to get the rest of the state on board.

In June, 2022, I attended the annual California Extreme Precipitation Symposium, in Folsom, about half an hour east of Sacramento. Some sixty in-person attendees had gathered in a hotel conference room and, along with online participants, reckoned with the power and peril of the state’s rivers—both those on the ground, like the American and the Sacramento and the Russian, and those that flow through the sky. Meteorologists and hydrologists—nearly everyone in attendance seemed to be a government -ologist of some kind—spoke of atmospheric rivers and changing watersheds and the glut of forecasting technologies that purport to help avert disasters.

The tone was clinical and sedate. With few exceptions, the presenters gave the impression that, thanks in part to human ingenuity, things were under control; it did not sound like the destruction of the Great Flood of 1861-62 would repeat itself. “We’ve built all these dams upstream,” Gary Estes, who has run the symposium since 1994, told me. “We have a new spillway, we have forecast-informed reservoir operations. We’ve built levees way bigger than existed back in 1862.”

Later, one of the presenters, Gary Bardini, of the Sacramento Area Flood Control Agency, took me on a tour of the region’s flood-prevention projects. It was the second day of summer, the air was an oppressive ninety-seven degrees, and green vegetation was already turning yellow. The Sacramento and American Rivers were low and docile. For three hours, we explored miles of rural Sacramento, walking alongside weirs and levees, some of them actively under construction. Dump trucks with tires twice my height rolled past us, ferrying dirt like so many ants, building what Bardini and his fellow-engineers hope will be unbreachable barriers.

Bardini spoke of past floods, including one, in 1986, that breached a levee near the confluence of the Yuba and Feather Rivers, drenching four thousand homes and causing nearly half a billion dollars in damage. Standing outside in the summer heat, surrounded by signs of California’s megadrought, I could understand why water calamities are hard to imagine until they happen. But imagination is just what climate change demands.

The state’s struggle against devastating floods will depend, in part, on residents who will need to prepare even when there is little water in sight, Nemeth, the Department of Water Resources director, told me. Even progressive California sometimes lacks the political will to fund research and flood-mitigation projects, and misinformation about the climate crisis—as Nemeth put it, “three decades of just a lot of fundamental questioning of ‘Is climate change even real?’ ”—continues to get in the way. But Swain told me that there are now promising signs that ARkStorm 2.0 could soon be fully funded. If so, the project will be able to map out where the deadliest flooding is likely to occur.

The storms now soaking California have yet to reach ARkStorm 2.0 proportions; such a calamity would require several more weeks of back-to-back, even more extreme precipitation, which aren’t currently forecasted. Still, Swain, like other scientists, sees what he considers the direct impact of human activity altering the Earth’s atmosphere. “Warming temperatures increase the water-vapor-holding capacity of the atmosphere,” he told me. “So we’re probably at a point where extreme precipitation events, on average in the world, are about ten to fifteen per cent more intense than they would have been.” In other words, this storm is bad. The next big one is likely to be worse.

• Germany-based Enpal, which provides solar power systems to homeowners, raised a Series D worth about $232 million.
• China-based Yuze Semiconductor, a development manufacturer of N-type solar monocrystalline silicon rods and silicon wafers, raised a Series B worth approximately $179 million.

The executive will take over a thriving brand in her biggest operational role yet

As Louis Vuitton staff put the finishing touches on the displays for a new collaboration with Japanese artist Yayoi Kusama earlier this month, they received a surprise visit. It was late at night at the flagship Champs Elysées store, but Delphine Arnault, the 47-year old daughter of LVMH’s billionaire owner and number two executive at Louis Vuitton, wanted to make sure the launch was perfect.

Nicolas Ghesquière, the creative director of Louis Vuitton who has worked closely with Arnault for more than a decade, said the 11pm visit was typical of her attention to detail. “When you’re designing, she already has a vision of what the product will look like in the boutique,” he says. “She is more demanding than most, but I find it reassuring since I know she will make sure that my ideas reach the market intact.”

It is easy to dismiss Delphine Arnault as another heir ushered up the ranks by their parent. Bernard Arnault built LVMH into a behemoth, turning it into the 12th-biggest company globally by market capitalisation and putting his family near the top of the world’s richest list.

On Wednesday, he promoted his daughter to chief executive of Dior, LVMH’s second-largest brand with almost €8bn in sales last year, according to Citi, excluding fragrance and cosmetics. It is a big step up, suggesting the patriarch believes Arnault has proven herself since joining the company in her mid-20s.

She will take over a thriving business — Pietro Beccari, her predecessor, has tripled sales since 2018 and the brand has an elite following from Shanghai to New York. Her nomination also thrusts her into the biggest operational role of any of the five Arnault children, all of whom work at the group. So far, she is the only one to sit on the 14-member executive committee.

Family ownership remains common in the luxury goods sector, as do questions over how successfully future generations carry on the businesses they inherit. Those are always in the background at LVMH, although Bernard Arnault, 73, has no intention of retiring anytime soon. Last year, the corporate bylaws raised the chief executive age limit from 75 to 80.

For the time being, says one analyst, “investors do not have a good feel for her.” But people who know Delphine Arnault warn against underestimating her. They say she has a knack for working with designers, a sense of what products will work and how to market them and — importantly for a company that makes most of its profits from leather goods — an eye for a hit handbag.

Softly spoken and protective of her personal life, Arnault lived in New York as a child — a big change from the family’s previous home in the northern French industrial town of Roubaix. This taught her adaptability and left her speaking nearly accentless English.

She later graduated from Edhec business school in France and London School of Economics, before learning the luxury ropes from Sidney Toledano and Michael Burke, two of LVMH’s best executives. From 2001 to 2013 she worked under Toledano at Dior, starting in shoes and progressing to deputy managing director, where she is credited with tempering the fallout of John Galliano’s scandalous departure in 2011.

Paying surprise visits to stores is something Bernard Arnault often does and in this, and other respects, Delphine is her father’s daughter. People who know them say they share a natural authority and directness, as well as strong ambition, although she does not display it as openly. They also share a passion for art and art collecting.

“There is a special bond — she is his only daughter and the eldest,” says Toledano. “She has a strong personality and can be direct with him.”

Within the company, her influence with her father is such that employees or managers often discreetly lobby her as a way to gain backing for a new project or a big hire.

Arnault has also played a major role in recruiting the artistic directors who bring LVMH brands to life. Her additions to the stable include Raf Simons at Dior, Jonathan Anderson at Loewe and Ghesquière at Louis Vuitton. In 2014, she created the LVMH Prize for Young Designers, a global talent search, with the winner getting a €300,000 grant and a year of mentoring.

“She is intimidating to the designers at first, but she has this quality of listening that makes her surprisingly approachable and accessible,” says Isabella Capece Galeota, who has worked on the prize since its inception.

Others say she has a calm management style and seeks to build consensus instead of imposing decisions. When she first began working on new handbag ideas with Ghesquière, she joined him in sitting on the workshop floor while he tried out different pieces of leather and fabric. “It was surprising . . . but she was very natural,” he recalls.

Outside of work, she has two children with telecoms billionaire Xavier Niel. A dedicated art collector, she sits on the board of the Gagosian art gallery with Snapchat founder Evan Spiegel, who is a friend of the family. “She got really into the Los Angeles art scene so we would go visit artists together when she was in town,” he says. “She is really interested in the creative process herself, and loves to see artists at work.”

One such visit to the studios of Jonas Wood and Alex Israel turned out to be fruitful for Louis Vuitton — the two took part in a 2019 project in which artists reimagined the top-selling Capucines handbag. As is typical for the Arnault family, work is never far away.

‘Why wear a copy when you can wear the original?’ — the vintage fashion dealer to the A-list

Want a classic YSL ‘smoking’ or a rare McQueen? Marie Blanchet will find it

“When Amal [Clooney] wore that dress, we had 500 Instagram followers in a few minutes. I thought there was a bug. I even called IT,” says Marie Blanchet, the Paris-based vintage dealer and founder of Mon Vintage. She’s referring to the 1999 beaded John Galliano dress she sourced for Clooney to wear to the premiere of her husband George’s film Ticket to Paradise in September last year.

A similar stir was caused by Rihanna when she appeared in a 1995 Galliano kimono cocoon coat; by Adwoa Aboah in a Tom Ford for Gucci gown; and by Meghan Markle in a Courrèges haute couture trapeze coat while pregnant, all sourced by Blanchet. Recently, a Grammy-nominated American rapper’s team asked Blanchet for two Hermès bags in time for Christmas — one, a particularly rare tricolour alligator Kelly from 1984, was valued at over €60,000.

Blanchet’s showroom in Paris’s Saint-Germain-des-Prés is an Aladdin’s cave of fashion treasures. Hanging from a Pierre Jeanneret screen is a museum-grade cream Balenciaga coat from 1955 and an original toile from Alexander McQueen’s Plato’s Atlantis collection, with dress pins placed by the designer himself. A blue-and-white Roberto Cavalli bustier gown, previously on display at the Met, lies languorously on a Charlotte Perriand day bed. There’s a Phoebe Philo for Céline pony-hair coat that never went into production.

By her own admission, Blanchet is a “Parisienne cliché”. When her showroom manager Marylou, smartly dressed in a striped Dior men’s shirt and Balenciaga tie, leads me in, Blanchet is smoking at her laptop, lighting her cigarettes with the Cire Trudon Madeleine candle that scents the space. Her three-legged bull terrier Snoopy, in a Saint Laurent bow, yawns in the corner. Later in the afternoon, she insists we take a champagne break (Ruinart Brut is kept at the showroom at all times for clients and special occasions).

Blanchet, in her thirties, has a cool, insouciant way of wearing high-value vintage. For our interview, she wears an early 1990s Saint Laurent two-button marine suit, black Balenciaga knife sock boots and a Line Vautrin 1930s bronze choker. “Every woman needs to have a Saint Laurent jacket in her wardrobe. And if you can, get a smoking,” she advises.

Blanchet’s love of vintage began in Paris’s Saint Ouen flea market and grew when she was offered the job of costume designer for the 2017 television mini-series Mata Hari. She trained with Parisian vintage legend Françoise Auguet, who could authenticate an unsigned dress by Coco Chanel just by studying the construction.

After a few successful shoe sales on Vestiaire Collective, Blanchet approached the luxury consignment website about creating a vintage category. The company did just that, and made her head of it. “It proved my point,” she says. “Why wear a copy when you could wear the original?”

She describes how she was then headhunted to be CEO of British boutique William Vintage. In 2020, while still in London, she opened Mon Vintage, and was invited to collaborate with Selfridges. “After Covid, we found that people wanted to touch and feel garments. Curation was important — it’s pieces that I truly believe tell a story about the designer and that feel relevant today,” Blanchet says.

Blanchet intended Mon Vintage to be a high-end service that departed from the regular ecommerce model. “We don’t have a website, all our pieces are available upon request through lookbooks. If clients are able to come to our showroom in Paris, they are invited by appointment only. We prepare a rack and do fittings with our couturier and with clients abroad, pieces are shipped, and fittings are done remotely.”

Blanchet and her team also source pieces on request, ranging from €120 for Levi’s to around €100,000 for a Thierry Mugler bustier that made its runway debut on Jerry Hall.

Pieces are generally delivered by hand after being painstakingly disinfected, dry cleaned and restored — a process that can take up to a month. “We never alter anything because we don’t want to lose the integrity of a piece, but we can adjust and tailor.”

Blanchet has an ongoing collaboration with The Row, which included providing rare Line Vautrin jewellery and decorative objects for its spring/summer 2023 show, which are available for purchase in the brand’s stores.

“We don’t see ourselves as archivists and, although we do work with the Palais Galliera, the Met and the Manchester Museum, we sell pieces that are going to have a second life on people who will wear them,” says Blanchet. “We also have collector clients who just want to invest in pieces, not wear them.”

Alexandre Samson, head of the contemporary design department at the Palais Galliera, Paris’s official fashion museum, first worked with Blanchet in 2018 when she lent a pair of Margiela shoes for an exhibition. “What sets her apart is her charisma, combined with a strong sense of current fashion and contemporary women’s needs,” says Samson. “She knows how to transcend the past and adapt it to the present.”

Blanchet keeps her sources — a worldwide network that she has nurtured over the past decade — to herself. “Some amazing pieces are getting rarer to find. And after Covid I noticed small vintage businesses opening through Instagram every day. It’s crazy! But people want curation, authentication, quality control and to know that they are buying from a safe source.”

Soon Blanchet will be heading to Florence to view a private collection of couture and tonight, after our interview, she and Marylou will visit an extensive personal archive of YSL Rive Gauche in Paris. So, if you happen to be in the market for something Saint Laurent and scarce, seek and she shall find.

Generationally high inflation was the story of 2022. That’s not going to be the story of 2023. The boogeyman of disinflation—and even some deflation—is about to become the biggest risk to stocks, and investors are going to have to figure out how to position portfolios for falling prices.

U.S. consumer prices rose 6.5% year over year in December, the sixth consecutive month the pace of pricing gains decelerated. Investors were pleased. The S&P 500SPX +0.40% gained 2.7% for the week. The Dow Jones Industrial AverageDJIA +0.33% gained 672 points, or 2%. The Nasdaq Composite COMP +0.71% was the big winner, closing up 4.8%.

Inflation, while slowing, is still here, though it might not be for much longer. Signs of looming price declines are starting to show up. Take apartments, which about 40 million Americans call home. They felt the inflationary pain in 2022, with average rents up about 7% year over year, according to the Bureau of Labor Statistics. But those high prices have started to pinch, and now it seems like no one is looking to move.

Real estate service provider RealPage notes that demand had “all but evaporated” by the end of 2022. “Volume always precedes price,” says one real estate investor, and he’s right. Rents will have to fall to get people thinking about moving again.

Car prices are also too high. The average new-car price in the U.S. hit a record $49,507 in December, according to data provider Cox Automotive. Those prices are starting to hit demand as well, and forcing companies to reconsider. Tesla TSLA –0.94% (ticker: TSLA), for one, cut prices for some of its vehicles

Price Cuts, Downgrades, the Market. Why Tesla Stock Is Having a Very Bad Day.

Certain new models of the EV company's Model 3 and Model Y vehicles are eligible for a $7,500 tax credit on new electric cars and plug-in hybrids.

Continue reading by up to 20% this past week as inventory piled up and order rates took a dive.

Everywhere we look, the price of goods is coming down. Steel? Aluminum? Copper? Oil? Corn? They’re all down 30%, on average, from the highs reached last year.

The one thing that isn’t coming down is wages, thanks to a labor market that still looks strong, with job openings in the U.S. holding steady between 10 million and 11 million. The combination of falling product prices with a strong labor market isn’t great news for investors, because companies will have to pay more for workers but will receive less for what they sell. Profit margins “are going to compress,” says Brian Rauscher, head of global portfolio strategy at Fundstrat. “That’s a given.”

Savita Subramanian, BofA Securities’ head of equity and quantitative strategy, expects the same. S&P 500 earnings estimates for 2023 are roughly 15% too high “amid demand uncertainty and a tougher pricing environment,” she writes.

She’s hunting for areas of the economy that can produce “more margin” and says healthcare stocks are a good place to look. BofA analysts favor stocks such as Boston Scientific (BSX), Intuitive Surgical (ISRG), and Tenet Healthcare THC +1.13% (THC).

Demand uncertainty is starting to show up, as well. Rauscher points out that new orders—a leading indicator of demand—are falling. The Institute for Supply Management’s index of new manufacturing orders has been in negative territory for six of the past seven months. Its index of new service orders slipped into negative territory in December for the first time since the spring of 2020.

“There is going to be a pricing power issue as we move forward…[so favor] companies with stickier margins,” says Rauscher. He wants ones that can still raise prices, cut costs effectively, or both.

That could mean trouble for the stock market overall, despite the strong start to the year. He recommends holding higher-quality companies with better balance sheets and strong management teams.

That’s a solid strategy for any market—and it’s especially wise when prices start to drop.

Mining and commodities trading giant Glencore was one of the FTSE 100’s top performers last year, and it could be set to repeat the trick in 2023.

Glencore (ticker: GLEN.UK) was the third-best performing stock in 2022, behind defense giant BAE Systems (BA.UK) and publisher Pearson (PSO), climbing 47%, largely driven by record thermal coal prices.

The miner’s exposure to coal is also what makes it an attractive proposition in 2023, while China’s reopening should push metals prices higher, adding to Glencore’s upside. Over the longer term, its status as one of the world’s leading producers and marketers of copper leaves it well placed to benefit from the global transition toward greener energy.

Record coal prices, largely a result of Russia’s invasion of Ukraine, and a subsequent natural-gas shortage helped Glencore’s earnings jump by $10 billion to a record $18.9 billion in the six months to June 2022. The company said around $8 billion of that increase came from its coal business. With coal prices remaining high, Glencore’s full-year earnings next month could be another catalyst for the stock.

Glencore is winding down its coal assets. The company described its policy as a “responsibly managed decline and stewardship of our coal business” at an investor day last month.

“Glencore’s sticking by thermal coal has proven to be a major advantage over its peers,” Liberum analyst Ben Davis says. He adds that “prices have the potential to remain elevated far above marginal cost of production in the long term.” Davis has a Buy rating on the stock with a 6.70 pound sterling ($8.17) target price, 23% above Monday’s price. The stock is up 10% since this column last wrote about the company in mid-August.

The policy has led to some environmental, social, and governance, or ESG, concerns, with a number of institutional investors filing a shareholder resolution earlier this month asking Glencore to explain how it fits in with the Paris Agreement and its own net-zero commitment. Glencore said it will publish its next climate report in March to update on progress since its 2020 strategy.

At the other end of the ESG scale, Glencore continues to invest in what it calls “key transition metals” such as copper, nickel, and cobalt, which it says will support global decarbonization.

“Glencore’s copper and cobalt exposure remains attractive in the long term, and the near-term upside offered by thermal coal more than offsets the long-term outlook at this point,” BMO Capital Markets analyst Alexander Pearce says. He has an Outperform rating on the stock, with a £6.50 target price.

The company announced “top up” returns of $4.5 billion in the first half of 2022, through a special dividend and a $3 billion share buyback program. In keeping with Glencore’s strategy to return surplus capital to investors, there could be more to come. “This narrative could build up in the stock going into the full-year earnings,” Citi analysts said last month. They have a Buy rating and a £7 price target.

China’s reopening, as it shifts away from its zero-Covid policy, should also benefit miners, though for how long is less certain. J.P. Morgan analysts note that the risks mount into the second and third quarters, citing potential Covid spikes and weaker iron ore seasonality. Glencore is one of the bank’s top mining picks to play China’s reopening.

Despite its bumper year of gains, the stock still looks cheap, trading at 6.5 times 2023 earnings estimates, below the industry average of 11 times, according to FactSet data. While Glencore is somewhat at the mercy of commodities prices, there’s enough to suggest that this undervalued stock is worth digging into.

If 2022’s stock market could be described as brutal, 2023’s might best be described as befuddling. Thankfully, there is a portfolio for that.

What’s so befuddling? It’s not just that there is uncertainty around inflation, growth, profits, margins, and even Covid, which continues to linger around the globe. It’s also that there’s no uncertainty about how experts view the market. All the talking heads believe the first half of 2023 will be bumpy, with things looking better by year end. “It’s a real uber-consensus,” says Lori Calvasina, head of U.S. equity strategy at RBC, who counts herself among the talking heads.

Everyone thinking the same thing is scary, and not simply because the consensus is bound to be wrong. It also means that investors end up positioned the same way in the same sectors and stocks, and that’s a recipe for volatility and disappointment as conditions change.

The solution to all this is to go where others aren’t. That means preferring utilities to consumer staples when looking to play defense. The S&P Composite 1500 Staples Index is trading at about 21 times estimated 2023 earnings, according to FactSet. That’s roughly a 10% premium to its own history and a 30% premium to the S&P 500 SPX +0.40% multiple. There is a long way to fall if investors sour on staples stocks. “I don’t want to own staples because of peak positioning and peak valuations,” adds Calvasina. “I want to be out of the staples when the market turns because they’re going to get crushed.”

Utility stocks look much better. They trade for about 19 times estimated 2023 earnings—a premium to the market and about a 12% premium to their history, similar to staples, but less than a 20% premium to the S&P. What’s more, the growth outlook for utilities is a little better than it has been in the past because they are adding more renewable power generation to their portfolios and are able to earn a regulated rate of return on the new investment, providing a boost to growth.

“Guess what I want to own in a sluggish economic backdrop?” asks Calvasina. “Anything with secular growth.”

That includes industrial stocks, which could get a boost thanks in part to all the new spending generated by the Inflation Reduction Act, the Chips Act, and the Infrastructure Investment and Jobs Act.

Even energy firms have a place in the portfolio, thanks to more-disciplined management teams, dividends, and buybacks, and because many investors seem to want to avoid them after a fantastic 2022. Funds have been flowing out of energy ETFs for the past few weeks. What’s more, “they probably won’t blow you up,” adds Calvasina.

And that’s an attractive feature in a market this confusing.