On the back of President-elect Donald Trump’s victory, some investors may be concerned about the outlook for already-scuffling renewable energy stocks and related ETFs. There’s an alternative view. And it could bode well for funds such as the ALPS Clean Energy ETF (ACES).
ACES and its peers slumped on Wednesday, but those declines may belie opportunity with clean energy assets. They also might belie opportunity because of speculation the incoming Trump administration will roll back the Inflation Reduction Act.
When evaluating ACES and related ETFs, investors should consider two realities. First, wholesale alterations to the IRA are unlikely. That’s because the legislation has provided some economic benefits to districts that were pivotal to Trump’s victory. Second, green energy equities and ETFs outperformed their fossil fuels peers during Trump’s first term in office.
ACES Could Be Rebound Candidate
It’s reasonable for investors to express pause toward clean energy stocks in the face of a second Trump term. But what politicians say and do are often two different things. Said another way, the long-term outlook for clean energy investing remains bright.
“The market’s reaction is [understandable. Yet] it overlooks the broader, global trend toward clean energy that continues to gain momentum, regardless of political cycles,” noted deVere Group CEO Nigel Green. “Despite the potential for a temporary slowdown in some US-based projects, the long-term outlook for the renewable energy sector remains incredibly positive.”
Green observed that Trump’s victory could represent a “significant opportunity” for market participants to scoop up clean energy stocks at attractive discounts. And those discounts that might not last long after Trump takes the oath of office.
There’s considerable political debate in this country regarding the government spending taxpayer dollars on climate-related issues. But other regions are highly committed to clean energy. And related spending doesn’t encounter as many headwinds in those countries as it does in the U.S.
“While a Trump victory could shift some US policies, the momentum behind renewable energy is undeniable, with countries across Europe, Asia, and the Middle East accelerating their green energy investments,” added Green. “Governments around the world are investing heavily in renewable energy solutions to meet climate goals, reduce carbon emissions, and diversify energy sources. The shift towards clean energy has become a fundamental aspect of economic planning and national security, with no signs of slowing down.”
Translation: It’s demand, not politics, that will chart the long-term course for ACES holdings.
For more news, information, and analysis, visit the ETF Building Blocks Channel.
