Will 2024 see clean energy investing rebound? That’s one of the key questions for markets to consider as 2023 draws to an end. Renewables and clean energy sources have several strong macro tailwinds on their side. Still, they haven’t yet realized their benefits completelor much of 2023. That’s due mainly to interest rates, a simple but difficult obstacle to overcome. Taken together, 2024 could see a clean energy ETF comeback that’s worth examining.
What kind of obstacles does renewable energy investing face next year? Solar and wind companies are facing persistently high interest rates and significantly mispriced inventory. At the same time, many firms’ valuations probably face some readjustment relative to their balance sheets.
Those factors, particularly interest rates, do bear serious consideration from investors. However, the “higher for longer” regime could still see rate cuts in the next twelve to sixteen months. This could provide meaningful tailwinds for renewables-focused firms.
The long-term case for a clean energy ETF remains a promising one. In the United States, twenty-nine jurisdictions which represent about half of U.S. electricity retail sales have mandatory renewable portfolio standards according to analysis from Deloitte. Furthermore, renewable portfolio standards and clean energy rules are set to require an additional 300 terawatt hours of clean electricity by 2030. What’s more, the Biden Administration’s major investment into renewable energy is still being deployed.
The Right Clean Energy ETF
Adding in other trends like energy storage developments, reshoring clean energy supply lines, and advancements in vanguard tech like clean hydrogen, the right clean energy ETF could be set for long-term growth next year. After 2023’s struggles, too, many may offer attractive entry points for curious investors.
One strategy that may merit a look, then, could be the FRNW Fidelity Clean Energy ETF. The strategy from Fidelity tracks the market cap-weighted Fidelity Clean Energy Index. FRNW looks for firms generating at least 50% of revenue from clean energy distribution, equipment manufacturing and technology.
FRNW charges a 39 basis point fee to do so, outperforming both its ETF Database Category and FactSet Segment averages over the last month, per VettaFi data as of December 11th. Returning 5.9% in that time, FRNW could be an intriguing option for those looking ahead to a clean energy comeback in 2024 and on.
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