The Circular Economy: A Sustainable Model Based on the Symbology of the Circle
July 9, 2024
Topic of the week
We have all heard about the concept of circular economy*, but do we really know what the adjective circular expresses when we talk about it?
The circle is a specific geometric figure whose most relevant characteristic is that all the points of its perimeter, also known as circumference, are equidistant from the center. It is, undoubtedly, a shape of high symbolic power, present both in the forms of nature and in the entire artistic and philosophical environment since ancient times.
If we had to briefly detail some of the symbolic qualities of the circular form, we could establish the following:
– Eternity and infinity
– Cycle and renewal
– Unity and totality
– Balance and harmony
– Inclusion and community
Given these characteristics of circularity, it is easier to understand the economic model that the geometric form presupposes.
Thus, the circular economy could be defined as a system that has no beginning and no end, symbolizing continuity. This reflects the idea of a continuous cycle of resources and materials in the circular economy, where nothing is wasted and everything is reused indefinitely.
In turn, the movement along the circumference represents the natural cycles and the processes of renewal and regeneration. In this type of economy, this translates into the constant reuse, recycling and renewal of products and materials, which remain longer in the market, extending the productive cycle.
In addition, it is about considering the complete impact of a product or process in the global system, promoting a holistic vision of the economy, understanding the processes as part of an integrated whole and not as the sum of its parts. In this way, avoiding the dispersion of resources, the protection of natural resources is promoted to ensure a sustainable future.
The standard model, as a simplified and symbolic representation of a more complex reality, will have subtypes and alterations of the circularity that can manifest themselves in tangents that enter and leave the closed form. The input of raw materials, energy, the transformation of products or the output of waste are some of the examples of this adaptation.
We can also find clusters of circular patterns that relate to each other, forming something like small constellations of circular economies of different magnitudes.
*The concept of circular economy was coined in 1976 by Walter Stahel, a pioneer in the field of sustainability, in his report «The Potential for Substituting Manpower for Energy».
The lighthouse of the markets:
The start of the second half of the year continued the positive trend that has characterized financial markets in 2024. Macroeconomic data (especially employment) suggest that economic activity is slowing in the United States but will not give way to a recession, and it is this that keeps the positive tone among investors as they anticipate interest rate cuts to be made by central banks. The S&P 500 closed at 5,567.19 points with a +1.95% weekly gain, once again at record highs, with technology stocks leading the gains once again. Reflecting this, the Nasdaq 100 rose +3.60%. In Europe, the rises were more moderate, with markets still awaiting the outcome of the elections in France, with the Euro Stoxx 50 closing with a gain of +1.74% and the Ibex 35 +0.72%.
The reaction of fixed-income investors was identical to that of equities, i.e., the greater visibility of the potential rate cut by the FED encouraged the bond market with purchases that resulted in the 10-year Treasury yield dropping 11 bps to 4.28%, with a Spanish bond that did much the same, lowering its yield by 9 bps to 3.32%. In Germany, the Bund saw its yield rise to 2.55%, while the noise generated in France by the elections and the result of the first round led to some defensive movement among investors.
As for commodities, gold’s price reflected the new monetary policy forecasts with significant increases, rising by +2.44% during the week and closing at the 2,400$/oz level. The reaction is as expected since, if the Fed were to lower interest rates twice in 2024, the ECB would have room to reduce its prime rate again, making investment in the precious metal more attractive. Brent oil failed to break through the $87-88/b level despite growing fears that production will be affected by the fires that are affecting Canada and by the hurricane season in the Gulf of Mexico. This week we will see monthly reports from both OPEC and the IEA, which will give us an indication of how these agencies view crude oil demand for the coming quarters.
At the macroeconomic level the highlight of the week was the US employment data, where private agricultural payrolls showed a significant drop to 136,000 versus an estimate of 160,000 and the previous figure of 193,000. The signal sent to investors is that the labor market is cooling as the unemployment rate rose to 4.1%, its highest level since late 2021. In Europe both CPI and the unemployment rate were fully in line with expectations, i.e. +2.5% and 6.4% respectively.
In the current week we will have few macro references and the most important ones will arrive from tomorrow Wednesday: i) CPI and import and export data in China ii) in Europe no relevant references will be published and the focus will be on knowing the future government in France and, iii) in the United States, on Wednesday Jerome Powell will appear before the Senate Banking Committee (clues on interest rates), on Thursday we will know the inflation data and on Friday the University of Michigan estimates on consumer confidence and its inflation estimates. But most importantly, and one that will attract investors’ attention, will be the start of the Q2 2024 earnings season. The highlights this week will come from Citigroup, JP Morgan Chase, BNY Mellon and Wells Fargo, four of the big U.S. banks.
The quote:
And we say goodbye with the following quote from Beverly Sills, American opera singer and director, «There are no shortcuts to anywhere worth going.»
Summary of main financial assets performance (8/7/2024)
This report does not provide personalized financial advice. It has been prepared irrespective of the particular circumstances and financial objectives of the persons receiving it.
This document has been prepared by Portocolom Agencia de Valores S.A. for the purpose of providing general information at the date of issue of the report and is subject to change without notice. Portocolom Agencia de Valores S.A. assumes no obligation to communicate such changes or to update the contents of this document. Neither this document nor its contents constitute an offer, invitation or solicitation to purchase or subscribe for securities or other instruments or to make or cancel investments, nor may they form the basis of any contract, commitment or decision of any kind.
The information contained herein has been obtained from public sources believed to be reliable, and while reasonable care has been taken to ensure that the information contained herein is neither uncertain nor unequivocal at the time of publication, we do not represent that it is accurate and complete and it should not be relied upon as if it were. Portocolom Agencia de Valores S.A. assumes no responsibility for any loss, direct or indirect, that may result from the use of the information provided in this report. Past performance of variables may not be a good indicator of future performance.