In today’s edition:
— Stocks rallied after every U.S. midterm election for 76 years; What will it take this time?
— Rivian shares pop as earnings lead to new rating on Wall Street
— Pacific Islanders call for urgent action at COP31 to avoid climate catastrophe
— UN’s Green Climate Fund approves a record $2 billion in funding
— Has global warming already stopped the next ice age?
One of the more remarkable Wall Street records tied to Election Day is that the S&P 500 has climbed in the year after every U.S. midterm election for 76 years, dating back to 1950.
Historians typically cite the removal of uncertainty among investors following an election for the rallies, and the frequent occurrence of gridlock in Congress, which prevents any radical legislation for two years and removes potential surprises.
Perhaps, but if that is the case this time, what can climate investors expect in the next 12 months?
The first thing would be a favorable interest rate environment. Rates directly impact most renewable energy and climate companies because they tend to borrow heavily in the early years to reach critical mass. Despite voter anger over prices, the U.S. economy has performed well recently, leading many to expect a series of higher interest rate moves in the New Year. That would have to change to create conditions for stocks to move materially higher.
Also, gridlock in Congress if the Democrats win big as expected would have specific implications for the bipartisan permitting bill being discussed. A big Democratic victory might lead the party to hold off on approving the bill until they take their seats in January. Such a move would likely kill the bill, which is flawed as it stands now but represents a great chance to get the energy transition moving again.
Finally, a continued rally in the S&P will require a settling down of AI concerns in coming months. The tech bros behind the AI frenzy have sided with President Donald Trump and that could lead to Congressional investigations that could put pressure on their stocks. A rotation among sectors toward Democratic favorites such as healthcare and even renewable energy would be welcome, but tech stocks still have to stay strong for the overall index to move higher.
In stocks as well as other forms of speculation, betting the trend is a popular bit of advice. The S&P 500’s record is indeed formidable. But when deconstructed for current times, it will require a near-term future a bit different than what the talking heads on Wall Street currently expect. Enjoy Election Night!
X | LinkedIn | Facebook | Instagram
If you have ideas or suggestions for us, contact me directly at dcallaway@callawayclimateinsights.com.
Tuesday’s subscriber insights
