Solar stocks have put together an impressive rally since mid-May. The Invesco Solar ETF
There were plenty of catalysts for this move including the soaring price of oil, natural gas, and coal which increases the viability of solar projects. Of course, this was precipitated by Russia's invasion of Ukraine and the dueling sanctions between the E.U. and Russia with one consequence being Russia shutting off natural gas flow to the continent.
As a result, electricity prices have soared across the Continent. Germany actually became a net importer due to this. In response, European countries are having to find new sources of energy including coal.
In an effort to increase solar energy production, the European Union simplified the regulatory approval process for new solar projects. There was also some hope that the climate bill could be passed if it was coupled with tax increases to make it budget neutral.
Finally, another catalyst was longer-term rates finally started to turn lower after rising for more than 2 years. This is because the market is increasingly concerned about a looming recession in part due to Federal Reserve policy.
As longer-term rates pull back, there are inflows into sectors that have strong and stable growth prospects like healthcare, biotechs, alternative energy, software, etc., as these growth rates are more attractive in a low-rate world.
However, TAN is off from its June highs by more than 10% with one factor being the pullback in energy prices. The other development weighing on prices is Senator Joe Manchin's rejection of the climate bill after earlier expressing potential support for a budget-neutral climate bill.
This continues Manchin's recent legacy of opposing President Joe Biden's agenda as he also stopped Senate passage of the Build Back Better plan citing inflation concerns. Critics on the left say that he is influenced by his ties to the fossil-fuel industry, while others counter that it's unlikely any other Democrat could be elected in West Virginia.
It also could be the final opportunity for the Biden administration to pass significant legislation given that Republicans are favored to take back control of Congress this fall. Biden also seems to be acceding to this reality as he is pivoting to pass a much skinnier bill which will essentially extend the ACA for another 2 years.
