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Solar Stocks Face Political and Economic Headwinds Amid Market Turbulence


Benjamin Hughes

March 28, 2024 - 15:22 pm


Solar Stock Turbulence: Trump's Return and Market Woes Cast Uncertain Shadows

Bloomberg Solar Energy Infographic

As the world of solar energy grapples with falling prices, rising tariffs, and surging borrowing costs, a looming figure casts an even more unpredictable shadow across the industry: Donald J. Trump. Glancing back to the year 2016, a period that saw Trump ascend to the presidency in what was considered a shocking victory, the global solar stock market experienced a significant downturn, plunging by 45%. Fast forward to 2020, and we observed a stark contrast as the solar benchmark more than tripled, coinciding with Joe Biden's presidential election triumph. Yet, after enduring three consecutive years marked by losses, the current political landscape suggests that investors may be in for another rollercoaster ride as election fervor heats up.

Beyond Presidential Influence: Real Challenges for Solar

While the occupant of the White House undeniably influences market sentiments, it's essential to peel back the curtain and reveal the more immediate and pressing challenges facing the solar sector. These challenges are far-reaching and encompass the Federal Reserve's monetary policies, the ongoing tug-of-war of pricing pressures, and the delicate dance of U.S.-China trade relations. However, the juggernaut of market psychology often dictates the financial narrative, steering perceptions that ultimately drive investment decisions.

As KeyBanc Capital Markets Utility Analyst Sophie Karp insightfully points out, "The investor perception played a greater role than the actual fundamental outcome." She reflects on the previous administration, noting that despite fears, there was no tangible negative impact on the solar industry during Trump's tenure. Nevertheless, the sector has not been immune to a sell-off. The MAC Global Solar Energy Index has demonstrated weakness over the past year as speculations increase about a potential Trump reelection and a Republican-led Congress. Prominent companies like Sunnova Energy International Inc. have seen their value significantly decrease by nearly 60% this year, with peers like Sunrun Inc. and equipment supplier SolarEdge Technologies Inc. also experiencing drops exceeding 20%.

The Power of Perception

What stands out is the power of perception and how it can either bolster or strain the solar industry's growth potential. Karp voices a critical perspective: "The perception of risk will be enough to cap the upside on this sector in the election year." The post-election economic landscape may prove even trickier to foresee. For instance, shortly after Biden celebrated his electoral victory in 2020, the MAC Global Solar Energy Index soared, reaching an approximately 12-year zenith, only to subsequently enter a prolonged decline.

This descent can be attributed to market dynamics where valuations surged past the anchor of industry fundamentals. Invesco's Head of Thematic Product Strategy, Rene Reyna, analyzes this overvaluation in tandem with the Fed's decision to drive up interest rates. This move placed significant strain on smaller, growth-focused companies that rely heavily on perpetual refinancing options. With increased borrowing costs and inflation bearing down on the market, consumer interest in sizeable investments like solar panels waned. Concurrently, a glut in solar equipment supply exacerbated the situation, driving prices downward and depleting company resources.

The Ripple Effects of Financial Policy and Trade

Subsequent to the pricing and interest rate woes came the ensuing layoffs as firms scrambled to curb expenses and stabilize their financial statements. Amidst these troubling times, the solar industry also faces the specter of changing laws under Biden's tenure, notably the Infrastructure Investment and Jobs Act (IIJA) of 2021 and the Inflation Reduction Act (IRA) of 2022. Investors are apprehensive about the possibility of a policy reversal, should Trump reclaim the presidency and the GOP take over Congress.

However, Bloomberg Intelligence Senior Energy Analyst Rob Barnett offers a dissenting view, suggesting that the fear of a rollback of the IRA is perhaps overstated. He references President Trump's unfulfilled promise to repeal the Affordable Care Act and suggests a similar outcome might occur with the IRA. Instead of a dismantling, solar companies have been leveraging tax incentives provided by the IRA to establish manufacturing facilities in the U.S., creating domestic jobs and complicating any argument in favor of reversing these measures.

The solar sector is also finely attuned to the friction between the U.S. and China and the repercussions it could have on the industry, especially considering the bipartisan scrutiny China is currently facing. Concerns include the potential of escalated tariffs on imported components and even the possibility of outright bans on solar equipment imports from China. In response to this uncertainty, Reyna from Invesco notes the industry's efforts to decentralize reliance on Chinese suppliers, while Karp of Keybanc believes that the impact of additional tariffs would be minimal, given the current low pricing of components.

Weathering the Interest Rates Cycle

Despite these formidable headwinds, there have been attempts within the solar sector to spark a revival. The final quarter of the previous year saw a resurgence buoyed by the belief that interest rate trends would shift favorably. Reyna reflects, "We saw some of these small-cap clean energy companies start to trade as though rates were going to fall, which would diminish financing costs and consequently enhance market dynamics."

Yet, the Federal Reserve dashed these hopes by maintaining its target rate during the March meeting. Now, investor anticipation has pivoted to a potential rate cut that might not emerge until June at the earliest. This delay promises to continue suppressing solar stocks, particularly against a backdrop of moderated growth expectations for the sector. Analysts project a decline in earnings per share of almost 12% for the current year.

In spite of such a bearish outlook, Reyna highlights a silver lining for long-term investors. The latest downturn has made entering the solar sector more financially accessible. The price-to-earnings ratio of the MAC Global Solar Energy Index has contracted to about 23, down from its peak of nearly 60 in early 2021. Moreover, industry analysts foresee a striking 148% surge in earnings per share by 2025, offering a promising prospect for those prepared to invest with an extended horizon.

Unwavering Growth: Solar's Future in the U.S.

Barnett of Bloomberg Intelligence holds an optimistic view, maintaining that regardless of the political figurehead, the U.S. will witness continued growth in both solar and wind industries. He asserts, "The amount of solar and wind additions in the U.S. was growing under Trump, it has continued to grow under Biden." Barnett stands firm in his belief that the next four years, no matter the presidential incumbent, will see ongoing expansion in the U.S. solar and wind sectors.

Indeed, market participants and stakeholders might find solace in Barnett's confidence in the sector's resilience and its ability to withstand the winds of political change. It is a clear acknowledgment of the industry's intrinsic momentum and the broader societal shift towards renewable energy sources that transcend the ebb and flow of presidential politics.


As the solar industry navigates the complex matrix of market forces, political headwinds, and global trade dynamics, it remains a sector characterized by both volatility and opportunity. Current and future investors are tasked with interpreting varying signals, from the swinging pendulum of election outcomes to fundamental economic drivers. Yet, amidst this confluence of factors, the solar industry continues to stand resilient, powered by innovation, strategic adaptation, and an unyielding global commitment to clean energy. The evolving landscape may be fraught with challenges, but the horizon holds a promise of revival and growth—illuminated by the inexhaustible light of the sun.

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