‘Blue Wave’ Expectations in U.S. Elections Trigger Green Stocks Frenzy
The growing expectations of a strong victory of Democratic presidential candidate, Joe Biden, in the U.S. presidential elections have prompted investors to focus their attention on renewable energy stocks. This has amplified a recent rush that was witnessed after the fiscal surge that has been earmarked by the European Union for green investments. Investors are moving on the belief that fiscal spending would reach trillions in the next few years, which would automatically trigger investments in a ‘green wave’, which is drawing comparisons to the blistering surge in technology stocks. The existing President of the United States, Donald Trump has decided to take the country out of the Paris accord, which is focused on fighting climate change.
However, Joe Biden, his rival in the November 3rd elections, has promised to establish a goal of net-zero emissions in the United States by 2050. Last week, the BofA Global Research highlighted in its weekly flows report that the increase in solar exchange-traded funds (ETFs) showed that investors were expecting a ‘blue wave’ in the elections on November 3rd. The color blue is associated with the Democrat party whereas Red is the color of Republicans. There has been an almost 150% increase in the Invesco Solar ETF, which is double of the rise of the index tracking the FAANG+ basket of tech companies that have been leading the stock market bounce back this year.
Solar ETFs have successfully outperformed the technology giants and the eye-popping moves are a reflection of investors’ bets that these securities will perform well under a Biden administration. This is primarily because of the green proposals put forward by the candidate. However, according to investors, these are also a reflection of long-term change towards investing that’s more environmentally friendly. It is because of expectations that most of the economic recovery will be green-focused and tech-driven. Experts said that they were expecting the recovery to be digital and green.
Some analysts said that they were not solely betting on the outcome of the U.S. elections, but they wouldn’t miss an opportunity of buying more for expanding their green investing strategy. There hasn’t been such a situation where something has been globally embraced with trillions spent in one direction. Oil giants, such as Chevron and Exxon Mobil have been on top of the charts for several decades relating to most-valuable energy companies. However, last week, Nextera, a solar and wind generating company managed to exceed its market value. It was able to move ahead of oil behemoths in terms of market capitalization.
In the next six months, the worst thing that could happen for renewables would be a victory for Trump and Republicans maintaining control of the Senate because it would negatively affect their market cap. But, it is also a fact that no matter what the election result, the broader trend would still be in favor of renewables. In addition, the excellent performance of even the European renewable companies indicates that the rally is not just hinged on the election results in the United States.