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The press team at BP has had a busy week. Ahead of a much anticipated strategy day, word has been spread that the company is going to scrap its goal of increasing renewable energy generation 20-fold. In fact, it seems it’s going to scrap all previous targets, and the company is going list back towards digging up fossil fuels. Investors, including the itchy activists now on the roster, will likely purr with approval. Returns matter. Like a stag do that piles into a wedding reception, only to discover it’s a cash bar, new CEO Murray Auchinloss is blowing the horn: RETREAT. Despite the financial press being littered with headlines, like spent confetti at the church, the company declined to comment. It is though, part of a wider trend, a shift, a move away from the full-throttled green agenda of not-so-long-ago. Companies are struggling to navigate the cross currents of politics, public mood and profitability. Perhaps on the back of a bare-knuckled Trump administration, perhaps driven by deeper societal issues, the zeitgeist is shape-shifting. Change is afoot. BP, in riding out what the hacks lavishly label an ‘existential crisis’ is one of highest profile victims, a company that should have at it’s core a viable, prudent, long-term strategy based around, one imagines, it’s core competencies. That it’s stuffed it so deep in the bundi, speaks of a C-suite that lost its way. When Auchinloss takes to the stage and surprises no one with the latest strategic pivot, investors will decide his fate. It also won’t go un-noticed that in today’s other ‘Top Stories’, news that Tesla has started 2025 with a big drop in sales. In Europe. Times are changing.

President Macron is the latest world leader to jump on the bandwagon, announcing plans for €109bn in AI investment, at a gathering of tight suits in Paris. Europe, according to the President, is ‘ne pas’ in the race. This follows the Prime Minister’s very own souped-up ambitions to create ‘AI growth zones’ and become a major tech player, turbocharging the mojo of a nation whose indifferent expression is stirred only by 2-for-1 meal deals and celebrity gossip. All change. That AI was the story in the stock market last year, is no secret. The IT sector rose three times more than the rest of the market fuelled by stocks exposed to the AI-boom. That data centres consume colossal amounts of energy, is also no secret. The US Department of Energy released a report suggesting that data centres might account for 12% of energy consumption by 2028, all but doubling in three short years. Experts mutter that adding capacity at such a lick, to meet the surging demand, is simply not going to happen. All the planning, application form filling, zoning and reviewing, within a regulated industry, means that the successful role-out of everything AI, has a big limiting factor. And if the challenge surrounding the rapid build out of non-intermittent electric power wasn’t enough, there is another problem: water. The racks and racks of severs, stuffed into rows and rows in the shiny new data centres, get hot. It is reported that cooling a 1GW centre requires up to 200,000 barrels of water… per day. It goes without saying that water is also needed for the electric power, courtesy of the steam needed to drive the turbines that get electric generators going. And the mega-scale centres planned to store all our future cat photos will need even more water. And probably more than even currently anticipated. That AI is a hot theme is out there. That water is a limiting factor, and thereby essential to the growth of $17 trillion of stock market value is, perhaps, less so. Hosepipe bans all round.

There was baring of teeth from a battle-ready Chancellor this week, as she pulled the driver out the bag and made it known that this government is going all in on growth. In announcing another go at laying down more tarmac at Heathrow, in order for the UK to become “the world’s best-connected place to do business”, she provoked a typically fiery outburst from Michael O’Leary, he of Ryanair fame. In a rant that would have had most PRs whimpering behind a sofa, he labelled the initiative a “dead cat”, and suggested “Rachel Rubbish” was basically clueless. Hmm. Should a third runway ever get past the newts, no flights will be taking off for at least a decade, suggesting growth in the interim will continue on its inebriated way. She was also out talking up the government’s commitment to wind, solar and hydrogen. Green jobs for a green economy. That Sweden, an early pioneer in renewables abandoned it’s targets last year appears not to have registered. Nor too the ongoing difficulties of the once muscular industrial base in Germany, as budgets get reset in line with an energy mix stripped of cheap Russian gas. And it is a stance that sits in sharp contrast to the mojo of the new US administration where a full throttled growth agenda sees fossil fuels playing the Lothar Matthias role. History will judge which policy will deliver the growth that politicians so clearly crave. History suggests it won’t be the UK. Meanwhile businesses will continue to suck on biros, crimp spend, pause hiring, and hope that energy bills will one day go down. Also of note this week is some murky goings on in the dark corners of the gold bullion market. According to Reuters, there is something of a run on at the London vaults. According to a “couple of sources”, those who are on the hook for delivering gold to whoever it belongs to, are scrabbling around to find it. In normal times it takes two or three days for delivery, a wait explained by ‘paperwork’, but currently it’s four weeks. Four weeks! But you said you had it in the vaults? The suggestion is that all the tariff talk in the US has meant that the vaults have been all but cleaned out of available stock and shipped back to New York or Chicago, or any other approved warehouse. London is just one hub, but it appears others are starting to clench the buttocks. Andrew Bailey, the Governor of the Bank of England, eased the ball past midwicket and trotted through for an easy single when lobbed a question about the situation in a Treasury Select pow-wow this week, suggesting it’s all in hand. Maybe it is, but given whisperings from some analysts, maybe it’s not. Bullion banks are short. And there may not be enough to go round. Popcorn at the ready. Gold, meanwhile, has taken out $2800. A record high.

Up goes the curtain. The show is on. In the jazz stakes, Trump’s second go at an inauguration was a mere Snoop Dog and a blast of dry ice short of a Super Bowl half-time show, as politicians and Wall Street rubbed shoulders, swapped smouldering looks and checked their Instagram. Topping it off was a run on by the world’s richest billionaire showing the sort of form that would have any top level boxer cooing approval. “I’ll have a pint of whatever that man is having“. Etc. That the whole fandango was inside is a point of note. The US, like much of the Northern Hemisphere is cold. Brass monkeys cold. Hence demand for natural gas hit a record high in the US yesterday. In the UK too, there are warnings of an unimaginably bleak ‘brown out’, and demand for more imports at a time when Europe itself is suffering from an equally bleak dunkelfaute. Bid it up. And yet the bullish outlook for US natural gas, rests not so much on the vagaries of the weather, and more on the rapid expansion of LNG export capacity. As facilities ramp up, so goes demand for gas; gas to send out to markets in Europe and Asia where prices trade at a significant premiums. LNG export facilities are expected to double over the next three years, although analysts whisper even this will prove conservative. In order meet this demand, higher prices will be needed. Gordon Huddleston, President of Aethon Energy, recently let slip that Henry Hub prices “will need to exceed $5” to drive significant development, while Nick Dell’Osso, the big boss of Expand Energy was a more measured, suggesting that prices need to be “materially higher”. So say the insiders. And then last night news hit the wires that the President was going all in on a massive build out of AI infrastructure. Data centres. And what do data centres need? Power. Lots and lots of power. And all this at a time when the growth of shale production is starting to flare.

Absorbing. Given the blandness of many a press conference, it was eye-balls out for Donald Trump’s pow-wow with the reporters at Mar-a-Lago, where the President elect cat-called Denmark over Greenland, suggested he fancied getting his hands back on the Panama canal, and continued to goad Canada. He also mooted a name change for the Gulf of Mexico. All told, a little more spice than what reporters had got used to from a tired-out Biden administration. What follows is anyone’s guess, but is likely to be more of the same. More grandstanding, more bluster, more mouthing off. A period then, where markets are in thrall to the headlines and late-night tweets. Uncertainty. And uncertainty at a time when inflation continues to pulse. West Texas Intermediate is stirring, nudging $75, at a time when inventories are at record lows. Commodities more broadly are up, the bellwether index of the CRB is up almost 30% over the past seven months. Despite the clucking of politicians that inflation is tamed, the lived experience is somewhat different. Everything from olive oil to cocoa. All up. Even those who buy live cattle day-to-day are tut-tutting at the cost of it all. The list goes on. How many would be caught deep in the heels if the Central Bank had to raise rates this year, a move that would cause a something of a kerfuffle in the White House aiming to be the most beautiful administration in US history. Set against a taut geo-political set up, where the stitching of the post WWII order is being slowly pulled apart, the years to come are likely going to be marked by higher volatility. Across the board, from inflation, to rates, to policy. And in response, investors are likely to slowly re-appraise their thinking on risk premium. How much are they being paid for the risk they are taking. The ZIRP era pushed capital into all sorts of unfamiliar places, courtesy of a mood that encouraged risk taking and speculative excess. The question is how fast they do so, and what might be the catalyst.

Whilst it may yet to have been seen down Gresham Street, the ‘Trump Dance‘ has gone viral. The NFL have called it ‘fair game’. It’s been spotted in the Concacaf league, the UFC and, perhaps bizarrely, by an English player on the LPGA tour. Strange times. With fist pumping and wide eyes, it depicts somewhat, the famed ‘animal spirits’. Such spirits are loose. Loose in the end zone, loose in financial markets. Tails are up. The fizz and pop of a Republican sweep has seen flows, massive flows, into US funds. Some $56bn in the dust-settling week post the vote. That taps off seven consecutive months of inflows, the longest since 2021. A frenzy in crypto has left Dogecoin – a coin that appears to be backed by absolutely nothing – with a market cap bigger than Ford Motor Company. Ford may have an EV strategy a little loose in the wheel nuts, but still, it’s hard not to go “hmm”. Hence strategists at BAML calling the current mood “dangerously bullish”. Those pumping dollars into the market may yet look back in time and think, maybe buying the most expensive market in history was a bit hot in the thighs. That said, a market can stay expensive for some time, more so when the underlying economy is chugging over in what appears to be fairly good order. Tax cuts are coming, employment is described as ‘full’, and wages are up. There’s no obvious sign of a pin to make it all go pop. And yet, as some analysts point out, the make up of the post election brouhaha, offers a steer, perhaps, on where the long-term winners lie. Defensives are catching a bid, bar healthcare which has wilted under the nomination of the up-for-it health secretary. Cyclicals – bar energy – are also lagging, given a protectionist agenda is not uber-bullish for world growth. Growth too, more broadly, is also off the pace. It speaks of the winners being in the belly of the S&P, those companies exposed to the domestic market. The US of A. The small and mid caps. The lost tribe. Given the tsunami of capital that has flowed into funds that just buy the wider market over the recent decade, those nimble active managers, those with an eye for price and valuation – those still in business – may yet be doing a Trump dance of their own. Gresham Street awaits.