Dn a media universe saturated by the war in Ukraine, it would seem that investors have missed the publication of the latest report by the United Nations group of experts on climate, the IPCC. It paints a terrifying picture of the present and future damage caused by our appetite for fossil fuels and calls for urgent action. But financiers now have their minds elsewhere.
While, in recent years, the cherished values of the Stock Exchange were to be found in renewable energies and the technologies of tomorrow, we have been witnessing, for the past week, a return to grace of the bad boys of the stock market, those whose attendance smelled of sulphur, producers of oil, coal or fighter planes. Bombs are raining down on Kiev and the Stock Exchanges are now marching to the sound of cannon.
In one week, the prices of Dassault or Thales, among the first French defense companies, jumped by 20%. It must be said that Thales added to this by announcing, Thursday, March 3, the best financial results in its history. And promises to increase the defense budgets of French presidential candidates should reinforce this trend.
Renewables not doomed
The movement is even more spectacular in Germany following the shock announcement by Chancellor Olaf Scholz on February 27 to double the country’s military budget. It didn’t take long for Commerzbank to announce that it would be pouring more capital into supporting its arms manufacturing clients, hitherto banned by many investors. Thus, rather than giving in to panic (for the moment) in the face of the risks of a generalized conflict in Europe and the prospects of a rise in interest rates, the markets are content to change tack.
This great “portfolio rotation” in financial jargon had already begun several months ago. As early as January, American technology companies listed on the Nasdaq had paid the price, and wind turbine producers have been slipping on the stock market for several months due to shortages of materials. But the Ukrainian crisis is further accelerating the phenomenon. Especially since the valuation of technology and renewable energy companies had reached levels that were inconsistent with their current performance.
This dramatic turnaround does not condemn more politically correct investments in energy or technology. This correction might even attract new investors. Thus, the car manufacturers Honda and Ford have launched vast green bond issues intended to finance their conversion to the electric car. But when the storm brews, financiers often tend to call in a few bad boys to the rescue.
