JPMorgan Strategist Who Predicted Biden Withdrawal Has Gloomy Outlook For EV Sector, Ukraine War

JPMorgan Asset Management strategist Michael Cembalest had previously predicted that President Joe Biden would drop out from this year's presidential race in his list of "top 10 possible surprises for 2024" published in the company's Jan. 1 "Eye on the Market Outlook" report.

"President Biden withdraws sometime between Super Tuesday and the November election, citing health reasons. Biden passes the torch to a replacement candidate named by the Democratic National Committee," the JPMorgan Market and Investment Strategy chairman wrote.

While he didn't mention the possible reasons for Biden's withdrawal, Cembalest had highlighted the president "has a low approval rating for a President with ~10% job creation since his inauguration." Biden recently announced he is dropping out of the race and endorsed Vice President Kamala Harris as his successor. Before that, he also made headlines after testing postive for Covid.

Cembalest's Gloomy Outlook For The EV Sector

The JPMorgan strategist also made several forecasts in his list of the top 10 surprises for 2024, including geopolitics, the COVID-19 vaccine, much worse power outages, and backlash in the EV sector.

"The driverless car backlash is coming from citizens who believe, as in the case of the despised urban scooter plague, that convenience for some results in dangers and inconvenience for others," he wrote, highlighting how testing of self-driving cars in the real world has hampered ambulance transports and emergency responders, caused accidents, and increased congestion.

Cembalest also pointed out the companies selling autonomous vehicle sensor technology called LiDAR, whose share prices have declined by 85% from their peaks. He doesn't see a rebound anytime soon.

Russia-Ukraine War To Drag On

The strategist also predicted that the war in Ukraine will continue with no ceasefire this year. His view was despite Russia reportedly losing 87% of its pre-war active troops and two-thirds of its tanks.

Cembalest's forecast also aligns with the Biden administration's view on the war. In May, US national security advisor Jake Sullivan stated that the Ukrainians could "hold the line" in 2024 and plan a counteroffensive next year.

Meanwhile, US Army General Christopher Cavoli said during an Armed Services Committee hearing in April that the Russian army is now 15% larger compared to the pre-Ukraine war era and is recruiting 30,000 new soldiers monthly. "Regardless of the outcome of the war in Ukraine, Russia will be larger, more lethal, and angrier with the West than when it invaded," he had warned.

US Cities To Face Major Power Outages

Cembalest also wrote in the January report that US cities could witness electricity or natural gas outages, given the "retirement of dispatchable power generation (nuclear, coal, gas) and underinvestment in pipelines, gas storage, and winterisation."

He cited a 2023 risk assessment report from the North American Electricity Reliability Association (NERC) that identifies the Midwest MISO region, from Minnesota to Louisiana, as the area with the highest risk of power outages, even during normal peak conditions. Cembalest also pointed out the rising unplanned outages during cold weather storms.

The strategist believes natural gas outages are worse because restoring them could take weeks or months. Gas distribution companies visit each building to close valves to avoid residual gas seepage before purging the primary distribution system and restoring the gas supply. Cembalest added that major outages may cause property damage due to burst water pipes in homes since water expands when it freezes.

A New Covid-19 Vaccine That Can Be Inhaled

Cembalest expects approval for an inhaled COVID-19 vaccine this year to minimise virus transmission. While there was a milder Covid wave last winter compared to the prior three, according to him, he highlighted the monovalent XBB.1.5 booster, with the Netherlands reporting almost 70% XBB efficacy rates in terms of hospitalisation and ICU admission risks for older people. However, the XBB booster doesn't help prevent transmission.

Cembalest said an inhaled vaccine is required to produce mucosal immunity, prevent infection, and lower transmission. He explained that several inhaled and tracheally administered proteins are being developed and have elicited strong immune responses against COVID in non-human primates.

Headwinds For the EV Sector Worldwide

The JPMorgan strategist highlighted the investigations into crashes involving the Tesla autopilot and the details of inadequate measures to ensure driver compliance. Late last year, Tesla recalled two million vehicles for a software patch update requiring greater driver compliance.

US EV sales in Q1 fell 7.3% quarter-over-quarter to 269,000 as Tesla sales remained flat and demand for EVs cooled despite more models entering the market. Tesla's market share has dropped to 51% from 62% in early 2023, and the company has announced trimming 10% of its workforce. Although Ford's EV market share increased last year, the company announced plans to slow down EV production to align with the slump in demand.

Elsewhere, China's EV exports declined by 13.2% for the third consecutive month in June, according to data from the China Association of Automobile Manufacturers. If Cembalest's predictions about the EV industry were accurate, it could translate to a significant setback for investors and founders like Elon Musk, who is planning to unveil a robotaxi concept in October.