Exchange-traded funds (ETFs) that focus on clean energy stocks are likely to struggle after Donald Trump takes office. The incoming president of the United States has made it clear that he plans to scale back pro-climate policies and ease regulations on the fossil fuel industry. This will likely push down many clean energy stocks, making it difficult for the ETFs that track them to rise.
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What Will Trump’s Policies Mean for Clean Energy ETFs?
Based on Trump’s first term, in which he rolled back over 100 environmental regulations, his policy agenda will likely prioritize oil drilling and fossil fuel production, with little to no funding for clean energy development. It’s easy to see how that could push down clean energy stocks, and with them, entire ETFs. The iShares Global Clean Energy ETF (ICLN) has fallen sharply this week, likely in anticipation of Trump’s policies.
This ETF tracks the S&P Global Clean Energy Index, which measures the collective performance of the clean energy sector and the companies within it. Its top holdings include First Solar (FSLR) and Enphase Energy (ENPH), both of which have received multiple Wall Street downgrades since Trump’s election victory.
ICLN may be partially protected by its large positions in European energy producers such as Iberdrola, S.A. (IBDRY) and SSE (SSEZY), which are less vulnerable to Trump’s policies. However, both First Solar and Enphase are also top positions in the Invesco Solar ETF (TAN), whose holdings include NEXTracker (NXT), another U.S.-based solar energy producer. Solar energy stocks are facing an uncertain future, and this uncertainty is likely to continue impacting the funds that track them.
What Is the Best Performing Clean Energy ETF?
A quick look at several clean energy ETFs reveals that both ICLN and TAN have recently been outperformed by the FT Vest U.S. Equity Moderate Buffer ETF (GOCT). The TipRanks ETF Comparison tool enables comparison of ETFs based on several parameters, including AUM (assets under management), fund flows, expense ratio, technicals, dividend analysis, and performance over different periods.
While Wall Street does not follow GOCT, the Invesco Solar ETF boasts a higher rating than the iShares Global Clean Energy ETF. Analysts have a Moderate Buy consensus on TAN based on 12 Buys, 19 Holds, and one Sell. ICLN, meanwhile, has a Hold consensus based on 48 Buys, 86 Holds, and five Sells. If Trump’s environmental policies push down clean energy stocks, however, Wall Street sentiment toward all three ETFs will likely shift in a negative direction.
