Centerfin Collective Weekly

Weekly Update Dec 16, 2022

Nuclear fusion is here! China rips off the band-aid, Central banks continue down the warpath

Nuclear fusion is here!

The Biden administration announced a significant milestone in the efforts to achieve ignition, a nuclear reaction that generates more energy than it consumes.  Nuclear fusion is how the sun generates energy; this is the first time this has been replicated on earth. The US National Ignition Facility has been working on getting to this point for over a decade. While still probably decades away, the goal is to harness nuclear fusion to generate abundant clean energy. As our clients know, one of our core long-term themes is the move to clean energy. We have expressed this in various ways. This development is noteworthy because it could have major implications for future commercial applications and repercussions on traditional energy sources.

China rips off the band-aid

This week marks a turning point in China’s COVID policy as it seems restrictions around the country are being swiftly removed, and the current omicron strain of COVID is quickly making its way through society. China’s zero COVID policy was a major source of pressure on the local economy and sporadic global inflationary pressures due to supply chain issues. As China finally opens up, demand for commodities will return, complicating the forward path of inflation.

Central banks continue down the warpath

Central banks in the US, Europe, England, and Switzerland all announced 50bps interest rate hikes this week. The message seems clear that tighter monetary policy is here to stay. Most central banks also indicated that further rate hikes are to come. While we believe that prior policy remained too loose for too long, we are similarly concerned that central banks are now running the risk of over-tightening. Most are worried about the tight labor markets continuing to put upward pressure on wages. The singular focus on reducing demand by weakening the labor market seems misguided, and governments could help by improving the supply side of the picture.

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