Force Multiplier

By Matthew Gutierrez and Shawn O'Malley · January 18, 2024

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Stock market bulls are salivating. There’s roughly $8.8 trillion in money-market funds and CDs, much earning around 5%.

?? Bulls are optimistic that with rates poised to drop, investors will allocate chunks of that money to the stock market in pursuit of higher returns, driving market indexes’ next move higher.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the three biggest stories in markets:

• Companies can’t get enough clean-energy tax credits
• The world’s biggest computer chipmaker reports earnings
• How global health spending could halt climate change

All this, and more, in just 5 minutes to read.

POP QUIZ

Which ETF holds the record for being the fastest to accumulate $1 billion in assets under management? (The answer is at the bottom of this newsletter!)

Chart of the Day

In The News

?? The Booming Market For Clean-Energy Tax Credits

A program meant to accelerate the transition from fossil fuels is helping put cash in renewable energy companies’ pockets by selling tax breaks to corporate giants like JPMorgan.

Some $9 billion worth of these deals have already transpired, with many more to come in 2024.

• In 2022, Congress signed off on a new tax credit transfer program, allowing roughly 100 companies undergoing over 1,000 clean-energy projects to sell their tax credits.
• By making the new credits tradeable, lawmakers hoped to encourage fresh money to implicitly fund clean energy efforts.

How it happens: These renewable-energy firms usually don’t make enough profit to fully utilize the tax credits they generate, selling the leftovers to other companies at a slight discount (someone might pay, say, $96 for a credit that reduces their tax bill by $100.)

• It’s a hidden form of subsidization for companies directly tilting America’s energy grid away from carbon-heavy sources.
• Writes the WSJ, “Transferring tax credits directly to corporate buyers offers a faster, simpler way for clean-energy companies to fund projects than existing tax-credit marketplaces.”
• Clean energy companies often raise funds for projects from external investors and/or lenders, and the extra cash from selling tax credits enables them to borrow even more to fund projects (or invest more of their own capital.)

Why it matters:

More companies are reportedly entering the market for these tax credits. One big example recently was the fintech giant Fiserv, which is paying $700 million for tax credits from the solar panel producer First Solar.

In December, the Treasury Department unveiled an online registration tool to make it easier for more companies to participate in the program.

• One Deputy Treasury Secretary said, “Increased access to clean energy credits is acting as a force multiplier so that more clean energy projects are built quickly and affordably.”

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