With Republicans in power, these renewable investments could still prove worthwhile

November 07, 2024 at 10:22 AM EST

Republicans are on track to control Washington. But some renewable investments could still prove worthwhile.

President-elect Donald Trump laid out two primary economic objectives in his campaign for re-election. The first was an extension of the 2017 tax cuts. The second, a push to onshore production. While the incoming administration embraced deficit spending in the past, a key promise has been to impose tariffs on imports and to offset spending by repealing the Inflation Reduction Act.

Separately, the Trump platform embraced a second withdrawal from the Paris climate agreement. Critically, key donors reportedly argued for the U.S. to withdraw from the UN Framework Convention on Climate Change (UNFCCC) and to roll back environmental and economic regulation for domestic legacy fossil fuel production. Regardless of rhetoric, pulling out of the U.N. convention may prove difficult.

Trump appears increasingly likely to have a mandate bolstered by a Republican majority in both the House and the Senate. Still, his tax cut proposal could face pushback from within his own party due to its $4.5 trillion price tag. What’s more, clean energy initiatives have created many high paying jobs in red states. And the GOP has embraced both crypto and AI which will cause electricity demand to skyrocket.

Many policy analysts anticipate token attacks on specific, vulnerable, decarb sectors like offshore wind, to satiate culture war demands by the Trump base. But the rapidly expanding solar and nuclear segments could be spared. This may provide long-term investors with the chance to buy into any sentiment linked weakness presented by political narratives.

Solar equipment manufacturers are a potential beneficiary of protectionist measures. The manufacturers stand to benefit from tariffs. Policy pushback on dominant Chinese solar manufacturers could give an edge to companies like First Solar FSLR and Fluence Energy FLNC .

Allocators will find fewer opportunities among ETFs as sector stalwarts like the Invesco Solar ETF TAN and the Global X Solar fund contain sizable holding of international stocks that would be hurt by U.S. tariffs.

In the run up to the election, Trump’s stand on nuclear power was unclear — although he appeared to favor the sector. James Pethokoukis, a senior fellow at the American Enterprise Institute, concluded in October that the nuclear industry should have sufficient GOP support to survive a second Trump term.

Key beneficiaries of new nuclear projects could include Flowserve Corp FLS and Fluor FLR . Flowserve supplies control machinery to nuclear operators while Fluor is an engineering company that is also the majority owner of NuScale SMR — a developer of small modular reactor (SMR) technology.

Allocators wishing to get in on the nuclear sector have a number of options. The VanEck Uranium and Nuclear ETF NLR has almost 50% of its portfolio committed to U.S. companies in the space. The Range Nuclear Renaissance Index ETF NUKZ is also heavily weighted in domestic nuclear stocks.

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With Republicans in power, these renewable investments could still prove worthwhile

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