Navigating the Energy Investment Shift: Unlocking Opportunities in Traditional and Emerging Energy Markets
Good evening, everyone!
I’m delighted to be here with you at Diamond Ridge Financial Academy to explore innovative investment ideas and strategies. Together, through consistent learning and practice, we can refine our professional skills, achieve sustainable wealth growth and ultimately attain the goal of financial freedom!
Last night, we took an in-depth look at the UK real estate market. From macroeconomic trends, policy environments and market sentiment, we uncovered the fragility behind its prosperity in recent years. Low interest rates, foreign investment inflows and policy stimuli have driven housing prices up over the past five years. However, high prices, market volatility and the upcoming stamp duty adjustments indicate that the UK real estate market is heading for a major shift in 2025. The balance between risk and reward has been broken.
By analyzing representative real estate assets and stock trends in the UK, we found that institutional funds have started to exit the market. Given the current global political and economic uncertainty, we suggest selling high-value real estate related assets and shifting focus to emerging tech industries with long-term growth potential.
Today, we’ll discuss another topic of interest, investing in the energy sector. Last weekend, a student asked me if renewable energy, as an emerging industry, could replace traditional energy. What are the investment opportunities in the energy sector?
To help you better understand the opportunities in this field, we’ll delve into a comparison of traditional and renewable energy today, analyzing their respective advantages, disadvantages and the risks and rewards at different investment stages. From innovation, policy support, market demand and global energy shifts, we’ll help you identify investment potential and layout strategies in the energy sector. The goal is to optimize your portfolio and seize high-quality investment opportunities. Before we dive into today’s session, let’s quickly review the stock market trends.
Today, the UK stock market showed a flat performance. The FTSE 100 index fell in the morning but gradually recovered in the afternoon, closing at 8,245 points, down just 0.05%. The retail sector stole the spotlight, with Next reporting strong sales figures and raising its full-year profit forecast, leading to a sharp rise in its stock price and reinforcing its position as an industry leader. Meanwhile, JD Sports and Burberry also saw significant stock gains. On the other hand, some homebuilders like Taylor Wimpey and Persimmon, along with bank stocks like NatWest and Barclays, performed poorly, dragging the FTSE 250 index down by 262 points, a drop of 1.27%.
In UK economic data, the construction PMI revealed that housing market activity is still shrinking. Industry confidence remains under pressure due to rising interest rates, signaling a high risk of a sharp drop in UK house prices this year. At the same time, the yield on UK 30-year government bonds surged to a 25-year high, reflecting reduced investor demand for long-term debt and increasing the government's borrowing costs.
Today, the US stock market was weak, especially the tech sector which drew much attention. The Nasdaq index dropped over 1.3% during the session, becoming the main drag on the market. NVIDIA, after reaching a record high, saw a sharp intraday drop of over 5% as profit-taking kicked in amidst policy uncertainties. While it briefly overtook Apple as the world's most valuable company, it soon lost the title again. Meta and Tesla also slid by 3% and 4%, respectively. The collective pullback in tech stocks reflects market concerns about rising bond yields.
Macroeconomic data also weighed on US market sentiment. The ISM services index showed persistent price pressures, reinforcing expectations of prolonged inflation. Additionally, the Nov trade deficit widened to $78.2B, indicating that while economic activity has picked up, its boost to GDP growth remains limited.
Overall, ahead of this week's US employment data release, market sentiment remains cautious. Combined with global political uncertainties, tech stocks have lost direction in the short term.
If we dive deeper into the topic of investing and analyze its essence, we’ll find that the key to making a profit lies in every single trading decision. Many investors dream of achieving financial freedom, but the secret to investment success isn’t just about “clicking a button and placing trades.” It’s built on a deep understanding of economic trends and the assets being traded. The main challenge for most investors is “making choices,” including selecting asset classes (stocks, forex, Crypto, gold), industries, individual stocks and deciding on entry and exit points. The root of these challenges lies in a lack of in-depth knowledge about economic trends and assets, leading to confusion in decision-making.
Take Coinbase as an example. From a short-term perspective, its stock price retreated after touching the 21-day moving average yesterday, making it reasonable to reduce positions. However, from a long-term view, as a leading global digital asset exchange, Coinbase holds tremendous potential in the wave of digital economic growth. For long-term investors, today’s drop might actually be a good opportunity to add to their positions. This highlights the importance of balancing short-term fluctuations with long-term trends in investing.
Similarly, the choice between investing in renewable energy and traditional energy needs to align with economic trends and personal investment styles.
First, let’s look at this year’s energy transition in the UK, which will be a battle over the future. Traditional energy, once the cornerstone of economic growth, is now being questioned for its ability to maintain that role. Meanwhile, renewable energy, such as wind and solar, is rising at an astonishing pace, driven by global climate goals and economic development. In this clash between the old and the new, investors need not only sharp market instincts but also a clear strategic vision. More importantly, finding opportunities between traditional and renewable energy is a critical question worth deep reflection.
The traditional energy sector in the UK has played a key role in economic growth. From the development of the North Sea oil fields to the rise of energy giants like BP and Shell, the oil and gas industry has not only brought significant economic benefits to the UK but also shaped the global energy market. However, with increasing environmental awareness and tighter government policies, traditional energy is under immense pressure to transform. Take the North Sea oil as an example, in 2022, the UK government raised the windfall tax rate from 25% to 35% to reduce reliance on fossil fuels and promote clean energy adoption. This move directly impacted the profitability of oil companies and forced investors to reassess their positions in the traditional energy sector.
However, investing in traditional energy hasn’t lost its appeal entirely, especially in the crude oil commodity market. Investments in traditional energy generally fall into two main categories: equity investments and futures trading. Equity investments in energy companies often come with high dividend yields but carry risks tied to the companies' operational performance. For example, BP has seen significant stock price volatility in recent years due to oil price fluctuations and environmental lawsuits. On the other hand, crude oil futures offer high liquidity and volatility, providing ample trading opportunities for investors.
Compared to stocks, trading oil futures is more flexible and has shorter cycles, making it a preferred tool for many short-term investors. For instance, during the 2022 Russia-Ukraine conflict, Brent crude oil prices surged from $80 per barrel to over $120 in a short period. Such sharp movements created huge profit opportunities for skilled traders, while stock markets typically respond more sluggishly to geopolitical risks.
Oil futures trading has become an important reason to attract investors due to its high leverage and flexibility. Through futures contracts, investors can control a larger market share with less capital. For example, in a typical futures trade, investors only need to pay 5%-10% margin to control oil contracts worth several times that amount. Additionally, crude oil CFDs (contracts for difference) offer even higher leverage, with common ratios ranging from 100 times to 200 times.
This leverage mechanism amplifies profit potential but also increases the importance of risk management. In comparison, stock investments require more capital and longer profit cycles, which makes them less attractive to investors looking for quick gains.
For instance, in the past week, the technical trend of West Texas Intermediate (WTL) shown in the chart above had green candles forming above the 21-day moving average, which engulfed the red candles and created a continued uptrend. If any students followed this contract trade, they would have seen a return of at least 80%, which is a profit opportunity that can be easily captured through technical analysis.
The coal industry’s outlook is more pessimistic. From the first Industrial Revolution to the beginning of this century, coal was the driving force of the industrial revolution, but now it is gradually fading out of history. The UK plans to phase out coal-fired power plants by 2025 and in 2016, coal’s share of power supply was only 9%. This data clearly shows that coal has been abandoned by the times and its investment prospects are dimming.
In contrast, the rise of renewable energy sources like wind and solar is unstoppable. As one of the countries with the richest wind resources, the UK has attracted a large influx of capital into this sector in recent years. For example, the success of the Hornsea project not only demonstrates the potential of offshore wind energy but also enhances the UK’s energy independence.
The rise of new energy is mainly due to policy support and technological breakthroughs. In the UK, the government has paved the way for the development of new energy through subsidies, tax incentives and legislation. For example, the UK plans to achieve net-zero emissions for the entire power system by 2035, which has driven large-scale deployment of wind and solar energy. Offshore wind projects like Hornsea in the wind energy sector have become one of the largest and most efficient cases globally.
Technological advancements have also significantly reduced the cost of new energy. For example, the cost of producing solar panels has dropped by over 80% since 2010, making solar energy projects increasingly economical. At the same time, advancements in energy storage technology (such as improved battery efficiency and smart grid development) have also enhanced the reliability of new energy, offering more commercial opportunities for investors.
The biggest advantage of new energy lies in its sustainability and environmental friendliness. Unlike traditional energy sources, wind, solar and biomass energy produce almost no greenhouse gas emissions, aligning with global emission reduction goals.
Although solar energy faces limitations from weather conditions, technological advancements and cost reductions are continuously expanding its range of applications. The subsidies and tax incentives provided by the UK government for solar power projects have made this sector's investment value increasingly evident. Additionally, biomass energy is beginning to play an important role in energy diversification, with investment opportunities in every stage, from raw material cultivation to energy conversion. These emerging sectors not only align with global emission reduction goals but also offer long-term growth potential in the green economy for investors.
From a global energy structure perspective, the supply chain of traditional energy is highly dependent on the geopolitical environment. For example, regions like the Middle East and Russia play an important role in energy exports in the international market. However, as the world accelerates its energy transition, this dependency is gradually being broken. The UK and Europe’s reduced reliance on Russian natural gas has boosted the market share of liquefied natural gas (LNG) and renewable energy.
Future energy market demand will shift from a single reliance on fossil fuels to a diversified energy mix. For example, the widespread adoption of electric vehicles has not only increased electricity demand but also driven the development of renewable minerals like lithium and cobalt. This provides investors with full industry chain opportunities, from energy production to downstream consumption.
The complexity of the UK energy market has also been confirmed by data. From 1989 to 2024, the average energy inflation rate in the UK was 5.22%. After reaching a historical peak of 59% in Oct 2022, it dropped sharply to -17.3% in Dec 2023. This volatility not only reflects the uncertainty in the energy market but also brings investment opportunities.
The UK's energy investment landscape is rapidly shifting from a traditional energy-dominated model to the rise of renewable energy. Although traditional energy is gradually shrinking under policy and environmental pressure, its trading value in the energy commodities market cannot be ignored. Renewable energy, represents the future development trend, with policy support and technological advancements providing investors with ample growth potential.
In this period of transition from old to new, we can both leverage the high liquidity and leverage effects of the oil futures market to gain short-term profits and capture long-term growth opportunities by investing in renewable energy projects. This balanced investment strategy will be key to navigating the future changes in the energy market.
Through tonight's sharing, everyone should deeply understand that with the continuous advancement of science and technology, new energy is gradually replacing traditional energy with unstoppable momentum. This trend is not without foundation; it is driven by policy support, technological breakthroughs and global attention to environmental protection and sustainable development. This is precisely why we repeatedly emphasize the investment value of the new energy sector.
Just like when we recommended buying Tesla stock at $355 (as shown above), many of our students made over 20% profit. This reflects the huge profit opportunities brought by new technology and new energy leading market changes. While traditional energy is facing a decline, it doesn't mean there is no investment value. For example, by flexibly using financial tools like oil futures, we can still capture the substantial profits from market fluctuations. The key is whether we can understand the market's operating patterns and find the right entry points.
More importantly, investing is a personalized art. Everyone's risk preference, investment cycle and financial situation are different, so we need to first clarify our own positioning, then choose suitable investment products and strategies. For example, students who like short-term trading can focus on the high-leverage opportunities in oil futures and contracts for difference, while investors inclined toward long-term returns can gradually invest in new technology and new energy sectors, capturing the dividends brought by technological development.
To better help everyone seize market opportunities, we are about to launch a brand new quantitative trading system. This system, based on multi-dimensional data analysis and intelligent decision-making, combined with market patterns and technical indicators, can help everyone achieve more precise investment operations. Whether you're a beginner or a seasoned investor with many years of experience, this system will significantly improve your investment efficiency and stability.
Here, we sincerely invite everyone to participate in the public beta test of our quantitative trading system, which will launch this month. This is not only an opportunity to learn market patterns and improve investment skills, but also a chance to truly put theory into practice and achieve real-world results. We believe that with the help of this tool, everyone can steadily increase investment returns and find their own "wealth code" in the complex market.
During the investment process, feel free to reach out to me with any questions. I hope that every day in the future, we can grow together on this investment journey!