Roger S. Conrad

The S&P 500 is still a little more than -10 percent below its January 2022 high water mark. But thanks to a buying wave washing over a handful of now very expensive big technology stocks, the index and related ETFs are up 12.8 percent so far in 2023.

The catalyst: An outbreak of interest in stocks perceived as benefitting from adoption of artificial intelligence.

The bulls envision a world where AI is used to augment productivity to transform pretty much every industry. Yet at least so far, there’s been little attention paid to the immense volumes of energy and communications bandwidth to support ubiquitous AI chatbots needed to make that dream a reality.

The last 18 months have been rough going for financial companies. And unfortunately, that’s when we re-entered Hannon Armstrong Sustainable Infrastructure Capital (NYSE: HASI), a business development company specializing in renewable energy and efficiency projects. Organized as a REIT for tax reasons, Hannon has more than doubled its total assets since 2019. And management reporting year-over-year increases in Q1 of 25 percent and 15 percent in its portfolio and managed assets, respectively. Distributable net income per share stayed on track with guidance for 10 to 13 percent annual growth, fueling robust dividend increases of 5 to 8 percent.

California’s wildfires are getting worse. The state’s electric power grid, however, is systematically becoming more resilient. From 2019-2022, for example, cumulative structures destroyed by wildfires linked to Edison International’s (NYSE: EIX) southern California system were 96 percent less than in the 2017-18 period. And as a result, the company’s post-2018 wildfire liabilities not covered by insurance have been immaterial, versus $8.8 billion incurred in 2017-18.

The headline may sound counterintuitive. But paying attention on what you can control has consistently proven to be the best way for investors to stay whole in tough times, while positioning for the recovery that always follows. The best metaphor for the current stock market is a small group of generals leading an impressive-looking advance, but with a rapidly diminishing number of troops behind them. We know from history that these things have always ended badly. But while they last, it’s increasingly difficult for investors to resist their pull.

First the good news: No companies in our Utility Report Card coverage universe announced dividends cuts last month. The bad news is none escaped the Endangered Dividends List. And in fact, the situation for several worsened, raising odds of cuts. That includes especially the three communications stocks: Telephone and Data Systems (NYSE: TDS), Uniti Group (NSDQ: UNIT) and Vodafone Group (London: VOD, NYSE: VOD).

A couple months ago, the stock market appeared headed for a relapse of potentially epic proportions. Founded on the premise the Federal Reserve’s battle against inflation had been won, the early 2023 rally was fizzling, as it became clear the central bank wasn’t relenting. The banking system had revealed some fairly large cracks, with the demise of SVB seeming to spread to regional banks in general. And the federal government was lurching toward a first ever default.

Earlier this month, New York announced a ban on new natural gas hookups starting later this decade. Then Texas imposed major new restrictions on wind and solar deployment. And both states respectively released plans to spend billions of taxpayer money to build new renewable energy and natural gas generation, if the private sector doesn’t jump fast and high enough.

Not to be left out, Congressional Republicans passed legislation to undo the Biden Administration’s two-year solar panel tariff relief. And the House is threatening to trigger a first-ever US default if Inflation Reduction Act subsidies aren’t unwound, just as the Biden Administration is rolling out all-new restrictions on fossil fuel use including transport.