Everybody loves a good story especially when it comes to buying and selling certain themes in the market. This phenomenon is more apparent now than ever as investors herd into those segments telling the best story while selling those that tell a bad one. This type of dualistic thinking is only widening the gap between the have and the have nots, when in reality the truth isn’t black and white but often some shade of grey.
A great example of this is what is happening with the electric vehicle and oil and gas industries. We don’t think it’s a coincidence that companies such as Tesla are setting new highs pushing the boundaries of euphoric valuations as investors are eager to drink the peak oil demand Kool-Aid that is being accelerated by the COVID-19 pandemic.
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Adding fuel to the narrative are developments such as California’s recent announcement that it is mandating only zero-emission cars to be sold in the state starting in 2035. The potential impact though is something that shouldn’t be taken lightly, especially given that the state represents more than 11 per cent of total U.S. car sales.