Election Day is just a few weeks away. That’s sparking increased focus on which sectors and industries could outperform or lag depending on the presidential battle results. Many financial professionals advise investors to not get caught up in the effects of political results. But some market participants just can’t help themselves. In their defense, there are sectors and industries that are viewed as politically sensitive. That includes clean energy, indicating funds such as the ALPS Clean Energy ETF (ACES ) could be in focus following Election Day.
In a case of “buy the speculation, sell the confirmation,” ACES and peers soared in the run-up to Election Day 2020 in hopes that President Biden would win. He did and he passed the Inflation Reduction Act in 2022. That contained the broadest renewable energy legislation in this country’s history. However, ACES and friends have slumped since Biden’s been in the White House.
ACES Investors Should Look Beyond Election Day
By no fault of the current administration, renewable energy stocks have languished in recent years. But that could be a sign investors should prioritize more than just domestic election results regarding clean energy ETFs like ACES.
“For long-term investors, it’s important to not get too caught up in the outcome of one election or another as it relates to the energy transition and the adoption of clean energy,” noted Morningstar analyst Brett Castelli. “History has shown that that transition will continue regardless of who wins this election. Now the pace may change depending on who wins.”
Castelli also points out investors may be pensive about former President Trump possibly winning a second term . That’s because he’s said he’d repeal the Inflation Reduction Act. But the analyst added that an outright repeal of the entire legislation is unlikely.
“Most safe would be the portion of the IRA that sought to reshore manufacturing of clean energy technologies, EV batteries, solar panels, wind turbines, back to the US from largely Southeast Asia. It plays to his economic policy as well his anti-China policy. He’s not going to do anything that’s going to harm US manufacturing and ship jobs to China, right?,” according to the analyst.
It’s also worth pointing out that while history isn’t guaranteed to repeat, it often rhymes in financial markets. That’s noteworthy because clean energy stocks and ETFs performed well under Trump. And fossil fuels names have been the better performers under Biden.
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