Three things that got the team talking this week - Firetrail Investments

Weekly insights from the Trail

Three things that got the team talking this week

January 20, 2023January 27th, 2023

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1. Batteries insulated from a charging lithium price…

Lithium is a crucial input for lithium-ion batteries, which are key to electrification as the world races to decarbonise. Lithium prices have soared 10x over the last two years. Knowing this, you might be surprised to hear that lithium-ion battery prices have barely changed over the same period.

Lithium is one of many components in a battery. Nickel, aluminium, cobalt, manganese and other materials are also important, diluting the impact that one commodity can have on the overall battery price. Manufacturers are getting more efficient year after year as well, offsetting raw commodity price increases.

Source: Trading Economics

Source: Bloomberg NEF

2. China’s population peaks…

For the first time since 1960s famines under Mao Zedong, deaths outstripped births in China in 2022. This has big implications for China and the rest of the world.

For China, a rapidly ageing population means there are 1.4bn mouths to feed but a falling number of young workers supporting them. For the rest of the world (Australia case in point), China’s growing population has provided an abundant growth market while domestic growth has been hard to come by. With China’s population now declining, economies will have to find new ways to eke out economic growth.

Source: Bloomberg, National Bureau of Statistics

3. The most widely anticipated recession in history…

It’s taken as a matter of fact. Recession is coming in 2023. GS data shows we are facing the highest probability of recession in recorded history, far outstripping probabilities leading into the GFC and the severe 1980s recession.

While it might sound scary, the good news for equity investors is that investors bake recession expectations into their forecasts well in advance. On average, equity prices have bottomed out 6-9 months before earnings have in past bear markets.

The lesson for investors: it’s best not to wait until the recession hits before you re-enter the market.

Source: Goldman Sachs
Past performance is not indicative of future performance.

Disclaimer

This article is prepared by Firetrail Investments Pty Limited (‘Firetrail’) (ABN 98 622 377 913, AFSL 516821) as the investment manager of the Firetrail Australian High Conviction Fund (ARSN 624 136 045), the Firetrail Absolute Return Fund (ARSN 624 135 879), the Firetrail Australian Small Companies Fund (ARSN 638 792 113) and the Firetrail S3 Global Opportunities Fund (ARSN 653 717 625) (‘the Funds’). Pinnacle Fund Services Limited ('PFSL') (ABN 29 082 494 362, AFSL 238371) is the product issuer of the Fund. PFSL is not licensed to provide financial product advice. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited (‘Pinnacle’) (ABN 22 100 325 184). The Product Disclosure Statement (‘PDS’) and Target Market Determination (‘TMD’) of the relevant Fund are available via the links below. Any potential investor should consider the PDS and TMD before deciding whether to acquire, or continue to hold units in, the Fund.

Links to the Product Disclosure Statement: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

Links to the Target Market Determination: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

For historic TMD’s please contact Pinnacle client service Phone 1300 010 311 or Email service@pinnacleinvestment.com

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