As Trump’s Approval Rating Rises, Solar Power Stocks Cast a Shadow

Solar Stock Plunge After Trump's 2016 Election
Market Concerns Over IIJA·IRA Repeal Pledges
"Solar Power Growth Continues Under Biden or Trump"

As the probability of former U.S. President Donald Trump's election increases, solar-related stocks are facing threats, Bloomberg reported on the 28th (local time).

In 2016, when former President Trump won unexpectedly, solar-related stocks plummeted about 45%. In contrast, when President Joe Biden was elected in 2020, the related index tripled.

Former U.S. President Donald Trump [Image source=Yonhap News]

Bloomberg explained, "Solar companies face urgent issues such as the Federal Reserve's (Fed) interest rate path, price pressures, and U.S.-China trade relations, but emotions often dominate the market." Sophie Kapp, a utility analyst at KeyBanc Capital Markets, said, "Investor perception has a greater impact than actual outcomes."

The MAC Global Solar Energy Index has shown weakness over the past 12 months as the prospect of former President Trump's return to the White House has increased. Residential solar system installer Sunnova Energy International's stock has fallen about 60% this year. Solar suppliers Sunrun and SolarEdge Technologies' stocks have each dropped more than 20%. Analyst Kapp said investors' risk awareness could limit the upside potential of the solar sector.

Solar-related stocks have struggled in recent years. Less than three months after President Biden's election in 2020, the MAC Global Solar Energy Index hit a 12-year high before declining. Renee Reina, head of thematic product strategy for Invesco ETFs, explained that prices had outpaced fundamentals. Subsequently, negative factors such as Fed interest rate hikes and equipment oversupply compounded the situation.

Currently, investors' biggest concern is that if former President Trump is elected, climate-related laws enacted under the Biden administration, such as the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA), could be repealed.

However, Rob Barnett, chief energy analyst at Bloomberg Intelligence, pointed out that this outlook is mistaken. He noted that although former President Trump pledged to repeal the 2016 Affordable Care Act (Obamacare), he failed, and since solar companies have created jobs in the U.S. through incentives from the IRA, it would be difficult for Republicans to repeal the law.

The U.S.-China trade conflict could also affect solar-related stocks. Both Democrats and Republicans are monitoring trade with China, and tariffs or import bans on Chinese components could be imposed. However, there is analysis that companies are reducing their dependence on China, and because component prices are low, the impact of additional tariffs would be minimal. Fed interest rate cuts could positively influence by increasing solar panel installations among homeowners.

Analyst Barnett said, "Solar and wind power in the U.S. increased under former President Trump and have continued to grow under President Biden. I believe that regardless of who the president is over the next four years, growth in the U.S. will continue."