(Bloomberg) — After seeing wind and solar stocks plummet in the hours after Donald Trump’s election victory, asset managers are zeroing in on a corner of the green transition they say will challenge the president-elect’s anti-ESG agenda: the network.
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A day after the election, TD Securities analysts told clients that grids and the equipment needed to build them now represent one of “the best-positioned energy transition subsectors.”
It is a call that is already bearing fruit. Since the Nov. 5 election, a key stock market indicator of equipment connecting to grids has risen about 6%, while the broader S&P Global Clean Energy Index has lost about a tenth part of its value. Suppliers in Asia and Europe that derive a sizable portion of their revenue from the U.S. market have also recovered, with Japan’s Hitachi Ltd. rising more than 8% in the same period.
Money managers say investing in U.S. energy and grids is a way to avoid the fallout from tariffs that will hurt other sectors. And as Trump’s protectionist policies appear to force more manufacturing back into the United States, American demand for energy will soar, raising the case for investment.
“We are really optimistic about energy demand in the United States,” says Ran Zhou, portfolio manager at New York-based hedge fund Electron Capital Partners LLC. “And associated with that is long-term carbon-free energy.”
Companies that develop networking equipment whose stock prices have risen since the Nov. 5 election include Eaton Corp., Rockwell Automation Inc. and Ametek Inc., all of which are up more than 6%. Emerson Electric Co. has added more than 7%.
Companies linked to electric grids were already outperforming other corners of the green sector long before the US election: the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index rose 20% last year. But a larger U.S.-based manufacturing sector boosted by Trump’s tariffs appears set to unleash a new wave of growth for U.S. grid stocks, according to asset managers interviewed by Bloomberg.
Trump has made clear that he wants to rescind unspent funds from the Biden administration’s signature climate law, the Inflation Reduction Act of 2022. And his pro-fossil fuel stance has fueled panic among green investors that a Trump White House will slow the development of renewable energy projects in the United States.