The US Shale Gas Rush

The US stock market continues defying those analysts who a while ago forecast a weak 2013 in spite of the increasing strength showed in the last years. Wall Street-based indexes appear to have reached new top figures amid the current results season.

Indeed, when investing in US equity, it is more important to look at growth and profits evolution than seeking companies with attractive prices–most valuations have now multiples biased upwards.

Today, most analysts recommend holding or buying US stocks into equity portfolios. The main reason, apart from listed companies improving prices and profits, is the moderate but constant economic growth in the US. The housing market is experiencing positive signs of activity, labour costs have been trimmed and a low dollar is helping exports. And, let’s not forget, there also is a new energy revolution going on in the US.

It’s the shale gas rush. The US’ deep underground has been found to contain high volumes of shale gas, which is easier now to extract thanks to a more affordable technology and greener methods–the so-called fracking–that have less impact on the environment.

US gas production has accelerated so much that the International Energy Agency estimates the US could become a net exporter in 2035–currently, it imports 20% of its gas consumption. Furthermore, according to a JP Morgan report, natural gas prices in the US are at least 50% cheaper than in the UK and just a third of what Germans pay.

There is no doubt that this gas revolution will gradually lend impetus to the US economic activity, bringing in investment and a competitive advantage against other countries in manufacturing, and reducing the trade deficit. In terms of geopolitics, too, the US will be more independent from carbon and oil. What’s not to like?