Feature Article

Weaker Q2 results from US communications giants apparently led some investors to assume the same for BCE Inc (TSX: BCE, NYSE: BCE). That didn’t happen, as the company posted solid numbers and affirmed 2022 guidance for growth in revenue, EBITDA, earnings per share and free cash flow.

The Dow Jones Utility Average has surged by roughly 150 points since mid-June. That’s a rally not a lot of people expected. And a good bit of the move followed something probably even fewer were looking for: The grand bargain between Senator Joe Manchin (D-WVA) and the White House that became the still-evolving “Inflation Reduction Act of 2022.”

There are growing signs of a deeper recession ahead. And the US Federal Reserve is unrelenting pushing borrowing costs higher to bring down inflation to its long-term target of 2 percent.

Investors and especially the media have a tendency to get carried away when it comes to the potential impact of government-led energy policies. The renewable energy stock boom that followed President Biden’s late 2020 election largely fizzled before he even took office. And the oil and gas companies supposedly targeted by administration policies have been on a major roll since.

It’s hard to believe that 20 years ago CMS Energy (NYSE: CMS) was a pariah in its home state of Michigan. The long-time CEO had exited in disgrace, after spectacularly failing to convert the electric and gas utility into a mini-Enron. And the company was floundering in debt and bad will from regulators and customers.

Last month, Aggressive Holding AES Corp (NYSE: AES) bought a 183-megawatt capacity wind power facility in Mississippi from Vestas Wind Systems (Denmark: VWS, OTC: VWSYF). It started up 96 MW of solar/storage projects in Massachusetts and New York. And it forged a consortium with Clearway Energy (NYSE: CWEN) to buy 7 gigawatts of solar panels annually from US manufacturers starting in 2024.

First, let’s look at the record. For the first six months of 2022, the Conservative Holdings returned an average of 4.3 percent. The Aggressive Holdings were up 0.44 percent. And the Top 10 DRIPs—which feature a fair amount of overlap with the Conservative Holdings—were ahead by 5.31 percent.

Recession may not be inevitable for the US economy this year. But with the US Federal Reserve doing its best Paul Volcker impression, it’s well past time for investors to prepare against the worst.

The highest inflation rate in 40 years plus, the worst bond market meltdown in decades, increasingly unpredictable and sometimes aggressive US regulation, war in Europe, the highest oil and gas prices since 2008 and now rising recession risk, as the US Federal Reserve jacks up interest rates to slow inflation.

Last month’s Labor Party’s victory in parliamentary elections is a sea change for Australian energy policy. And long-suffering shareholders of AGL Energy (ASX: AGL, OTC: AGLXY) are now uniquely positioned to benefit.