Energy Prospects as the 2024 U.S. Election Approaches

Traditional energy is on the ballot as a very contentious U.S. election is approaching. The events over the past weeks have been unsettling, to say the least. Former President Trump survived an assassin’s bullet that missed by a slight right turn of his head. A successful Republican convention caused a shift in polls, leading to the incumbent President standing down and throwing his support behind Vice President Harris. The Democrats will hold their convention in Chicago starting on August 19.

As Republicans and Democrats battle for the White House and majorities in the House of Representatives and the Senate, many issues divide the political parties. One of the leading controversial issues is the future of U.S. energy production and consumption.

If past elections and the current polls are any guide, the Harris-Trump contest will be close. The election results will affect U.S. energy policy in the coming years.

The election is shaping up as a high-stakes tennis match, with each side taking turns serving and controlling the media coverage. The bottom line is it will be close and come down to the final serve.

Democrats: Climate Change is “an existential threat”

• The Biden administration has addressed climate change with support for alternative and renewable energy and has opposed future expansion of fossil fuel production and consumption.
• If she wins the November election, Vice President Harris will likely continue the greener energy path and accelerate initiatives.
• If Democrats win majorities in the House of Representatives and the Senate, passing a green legislative agenda will be easier.

Stocks and ETFs that could thrive if Democrats prevail in November

• Electric vehicle manufacturers could see increased business and investment flows if the green agenda proceeds.
• While Tesla (TSLA) is the leading EV manufacturer, the KARS, DRIV, IDRV, LIT, and BATT are EV and battery metal companies that stand to move higher if Washington, DC, legislates electric vehicle mandates.
• Wind and solar ETFs could also benefit from policies addressing climate change.
• FAN is a wind-energy ETF, while TAN invests in solar energy. More diversified renewable energy ETFs include PBW, QCLN, ACES, SMOG, and PBD.  

Republicans: Energy independence and revenues from tapping the vast U.S. energy reserves

• Former President Trump and Republicans favor fighting inflation and achieving energy independence through a “drill-baby-drill” and “frack-baby-frack” approach to hydrocarbons.
• The Republican nominee stresses the vast oil reserves that could make the U.S. the world’s leading traditional energy exporter.
• Since energy is a critical component of most goods and services, more U.S. output, leading to lower oil prices, could decrease inflationary pressures.
• Increased U.S. output could take pricing control from the international oil cartel and Russia.

Stocks and ETFs to consider if U.S. energy policy shifts

• Increasing U.S. oil and gas production would favor the leading U.S. integrated producers, XOM and CVX.
• The XLE and VDE are ETFs that own the leading U.S. oil and oil-related companies.
• A second Trump administration could increase the demand for oil services and related companies. Companies like SLB, HAL, and BKR could see revenues rise. The OIH ETF owns shares of the leading oil services companies.

Elections have consequences: Expect lots of market volatility over the coming weeks for four compelling reasons

• Markets do not embrace uncertainty as it increases volatility. The close election could cause lots of price variance in traditional and green energy stocks and ETFs over the coming weeks and months.
• The four reasons for energy volatility are uncertainty, shifting political polls, a turbulent geopolitical landscape with wars in Ukraine and the Middle East, and the trend towards de-dollarization by China, Russia, and other countries affected by U.S. and European sanctions.
• Volatility creates opportunities, but discipline and a risk-reward plan are critical for success.

Elections have consequences. Traditional energy versus a greener path is on the November U.S. ballot, as the results will determine U.S. energy policies for the coming years. As the election will be a close contest, expect lots of price variance as the election approaches.

Thanks for reading, and stay tuned for the next edition of the Tradier Rundown!