If you live in America, or anywhere else and have been paying attention for that matter, I am sure you are aware that there will be a Presidential election here in 2020. Given that the Democrats have yet to pick a candidate from a crowded field and especially given what happened four years ago, I have no idea at this point who will win. Investors, however, don't need to know who the next President of the U.S.A. will be to set a strategy for next year based on politics. That can be done on the basis of what kind of campaign will be run.
I'll go out on a limb here and say that whoever wins the Democratic nomination, they are not going to be pro big oil. The rise of Donald Trump has seen the destruction of the middle ground in American politics, and climate policy is an area where talk is cheap and grand plans will no doubt be commonplace. Energy policy, however, is also an area where rapid change is almost impossible.
Apart from the practical and infrastructure challenges of attempting to shift away from fossil fuels, there are the security and economic issues, so when all is said and done, big oil will almost certainly be fine. Again though, the actual outcome doesn't matter right now to investors. To the extent that politics is an influence, the markets will be moved in the first three quarters of next year by what is said, and on that basis, solar stocks could be massive beneficiaries.
Every Democratic contender's policy platform contains some kind of a nod…
If you live in America, or anywhere else and have been paying attention for that matter, I am sure you are aware that there will be a Presidential election here in 2020. Given that the Democrats have yet to pick a candidate from a crowded field and especially given what happened four years ago, I have no idea at this point who will win. Investors, however, don't need to know who the next President of the U.S.A. will be to set a strategy for next year based on politics. That can be done on the basis of what kind of campaign will be run.
I'll go out on a limb here and say that whoever wins the Democratic nomination, they are not going to be pro big oil. The rise of Donald Trump has seen the destruction of the middle ground in American politics, and climate policy is an area where talk is cheap and grand plans will no doubt be commonplace. Energy policy, however, is also an area where rapid change is almost impossible.
Apart from the practical and infrastructure challenges of attempting to shift away from fossil fuels, there are the security and economic issues, so when all is said and done, big oil will almost certainly be fine. Again though, the actual outcome doesn't matter right now to investors. To the extent that politics is an influence, the markets will be moved in the first three quarters of next year by what is said, and on that basis, solar stocks could be massive beneficiaries.
Every Democratic contender's policy platform contains some kind of a nod to the "Green New Deal". Even Joe Biden, the most moderate and mainstream of the candidates, talks about a "…clean energy revolution…". His plan and all the others call for big investments in clean energy, and history suggests that means more subsidies for solar companies.
Another big issue in the campaign will be trade. The Democratic nominee will no doubt say that they will end the trade war, and Trump will say that he is the only one who can do so from a position of strength. As the year progresses, one of two things will happen. Either an agreement between China and the U.S. will be reached before the vote or there will be a lot of talk about one immediately after the election. Either way, given the interdependence of the two countries, when it comes to solar production, stocks in that industry will benefit.
There are, therefore, good reasons to think that the political campaigns next year will offer a boost to solar stocks. Usually, when analysis points to an industry rather than an individual stock or commodity, my favorite way to play it is with an ETF. That flattens out the volatility of individual stocks somewhat and gives a play on the whole industry, but in this case, it wouldn't be my choice. This is specifically an American story, and the big solar ETFs such as TAN are global.
A more focused approach could be to buy a couple of U.S. listed stocks. My choices would be First Solar (FSLR) and SunPower (SPWR). In the past, I have seen those two as an either/or choice, as FSLR is focused on commercial and utility projects, while SPWR is more about the residential but if there is talk of government-sponsored growth in the industry and a return to a free market internationally, both can benefit.
The point is that to set an election strategy for energy investing, you don't have to predict who will win. You simply have to predict which policy areas and positions will get talked about and reported the most, and climate change and energy policy is a pretty good bet. You might think that is good or bad. Or you might think that truly revolutionary change is coming, or that, as has happened in the past, big oil will win out by getting everything bogged down and buying themselves some time. None of that matters in terms of the strategy, however.
The fact is that as the 2020 Presidential campaign takes shape, there will be a lot of talk about subsidizing and encouraging the solar industry, as well as promises to end the trade war. That will help U.S. based solar companies, so holding FSLR and SPWR throughout the campaign at least should be a rewarding trade.
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