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Today's big stories

Volkswagen is aiming to sell one million electric vehicles this year
You might want to consider switching out some of your traditional investments for some wildcards right about now – Read Now
Goldman Sachs upped its US growth forecasts on the back of the country’s economic support package

Plug Life

What’s Going On Here?

Sparks could be about to fly: Volkswagen – the world’s second-biggest carmaker – announced on Tuesday that it’s aiming to sell one million electric vehicles (EVs) this year.

What Does This Mean?

Volkswagen’s new target represents a big step up from the 231,000 EVs it delivered last year, and could see the German carmaker get one over on Tesla: its biggest EV rival produced 500,000 vehicles last year, and plans to increase that by 50% or more this year. And even if Volkswagen can’t catch up in 2021, it has the longer term in mind: the company’s aiming to become the world’s biggest EV manufacturer by 2025 at the latest (tweet this). Investors, for their part, seem pretty optimistic about its chances: they sent the company's shares up 7%.

Why Should I Care?

Zooming in: It’s all down to the batteries.
Batteries are the most expensive part of an EV: get ‘em cheap and companies will slash the cost of their cars, making them a more appealing buy for customers and – fingers crossed – pushing up sales. That might be why Volkswagen also unveiled plans to build six battery factories in Europe by 2030 – a move that should cut its battery costs by as much as 50%.

For markets: These valuations are looking a bit skewiff.
Volkswagen’s odds of overtaking Tesla’s sales are looking pretty good, but its odds of overtaking its rival’s market value – $670 billion to Volkswagen’s $145 billion – are far slimmer. Some investors reckon this valuation gap can partly be explained by Tesla’s superior software – specifically its autonomous driving technology. Then again, it’s not like Volkswagen hasn’t got the edge in other ways: it already has the infrastructure to churn out millions of vehicles every year.

You might also like: How to profit from the buzz around electric vehicles.

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2. Analyst Take

Tradition Is Out, Wildcards Are In

What’s Going On Here?

Plenty of retail investors take the traditional approach of dividing their portfolios between just two asset classes: stocks and bonds.

And it’s been a pretty reliable option for a long time, earning an average of 6-8% over the past 30 to 40 years. But its days might be numbered.

Because here’s the thing: the head of Singapore’s sovereign wealth fund is expecting that sort of portfolio to generate a return after inflation of just 1-2% a year over the next decade.

It’s not providing much by way of diversification either, since stock and bond prices are moving in the same direction on the back of rising inflation expectations.

Luckily, the solution is relatively simple: choose a few left-field investments that’ll bring another dimension to your portfolio.

That’s today’s Insight: the five simple tweaks you can make to your portfolio to boost its returns.

Read or listen to the Insight here

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Missing Piece

What’s Going On Here?

Goldman Sachs upped its US growth forecasts over the weekend, but just as noticeable is what the investment bank left out of its updated prediction…

What Does This Mean?

The US just agreed to pump $1.9 trillion into its economy, so Goldman’s decision to bump up its growth forecast – from 6.9% to 7% this year, and from 4.5% to 5.1% in 2022 – hasn’t come as much of a surprise. And while those adjustments might not sound like much, Goldman’s previous estimates had already taken $1.5 trillion of economic support into account and were already well ahead of economists’ forecasts of 5.5% and 3.8% for this year and next. There might be more growth to come too: Goldman’s forecast didn’t even pencil in the boost from the potential $2 trillion infrastructure spending the US president touted in his election campaign.

Why Should I Care?

For markets: Invest in the pickaxes, not the gold.
If the $2 trillion infrastructure investment goes ahead, it’s expected to be spent on building greener homes, expanding the EV charging network, and fixing highways, bridges, and airports. But since it’ll need to gather enough political support to pass, that’s a pretty big “if”. Still, the prospect alone has pushed up the stocks of companies that stand to benefit – from equipment makers to engineering companies.

The bigger picture: Tax hikes could keep the US economy from overheating.
Spending trillions is easy, but finding trillions is another matter entirely. One potential solution, then, is to up taxes on businesses and the wealthy. And while skeptics might argue that the move would hurt economic growth, that might not be true: higher taxes could curb consumer and company spending, which would slow down price increases at a time when excessive government spending is at risk of pushing up prices too fast (i.e. inflation). That’s when the central bank would be forced to tweak interest rates, which could be bad news for your stocks...

You might also like: How to pick the stocks that’ll benefit from big infrastructure spending.

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💬 Quote of the day

“Love with your mouth shut, help without breaking your ass or publicizing it: keep cool, but care.”

– Thomas Pynchon (an American novelist)

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Give your portfolio the expert treatment

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But you’d be wise to keep your portfolio diversified and rebalanced regularly – and if you can do that with minimal effort and cost, all the better.

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Disclaimer: Capital at risk. *ETF costs apply. Welcome bonus terms and conditions apply, subject to minimum investment.

Investengine (UK) Limited is Authorised and Regulated by the Financial Conduct Authority FRN [801128].

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📚 What we're reading

Vaccine? No thanks (Vox)
Don’t just present your idea: Pitch it (Pitch)*
Philly dims the lights (ABC)
Everyone is beautiful, no one is horny (Bloodknife)

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🤔 Q&A · RE: All That Glitters

Q: “What can happen if inflation’s much higher than the central bank’s target for a long time?”

– Elizabeth in British Columbia, Canada

A: “If the prices of goods and services shoot up and the cash in bank accounts can’t keep up, people won’t have as much money to spend on day-to-day things, leading to a slowdown in economic activity. That’s what happened in Turkey in summer 2018: the country’s inflation was three times higher than the central bank’s target, encouraging investors to sell Turkey’s currency, stocks, and bonds, as well as take their cash out of the country.”

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Finimize - 🚘 Watch your bumper, Tesla...

Today's big stories

Plug Life

What’s Going On Here?

What Does This Mean?

Why Should I Care?

Tradition Is Out, Wildcards Are In

Grab your tax-free ISA while you can

Missing Piece

What’s Going On Here?

What Does This Mean?

Why Should I Care?

Give your portfolio the expert treatment

🧐 Be the hipster you were born to be

Older messages

🤑 America's new most valuable startup

🤩 Psychedelics are dope

💅 BlackRock: gold is pointless

📈 Game on, Roblox

🏀 Tech stocks bounce back

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