A $2 Billion Solar ETF Joins Options Mania on ‘Blue Wave’ Bets
As U.S. stocks rallied Wednesday, one area of the market deemed sensitive to Joe Biden’s election chances absolutely took off.
Shares of renewable-energy companies expected to benefit from Biden’s energy policy plans surged, continuing a trend of outperforming the broader market as the Democrat’s chances to win steadily improve. The $2 billion Invesco Solar ETF climbed 5.4%, extending a six-day rally to 20%. The S&P 500 is up just 2.5% in that span. Options traders have piled into the exchange-traded fund, with a record 17,000 calls changing hands Tuesday. NextEra Energy Inc., the largest renewable supplier, closed with a higher market valuation than Exxon Mobil Corp.
Day traders have also jumped on the bandwagon. A list of the top 10 “buys” among online traders tracked by Fidelity Investments on Wednesday showed that three of them are renewable-energy companies -- Sunworks Inc., Ocean Power Technologies Inc. and Westwater Resources Inc. Another stock in that ranking is American Resources Corp., which supplies materials for infrastructure -- an industry also seen as a beneficiary of a potential fiscal boost.
The latest buying frenzy followed Biden’s first debate with President Donald Trump last week. Since then, the contender’s lead has widened in recent polls, an edge that’s viewed as portending a Democratic sweep of Congress as well as a potential increase in infrastructure and green-energy spending.
“The infrastructure and green trade is a very ‘blue wave’ concept,” said Yousef Abbasi, global market strategist at StoneX, referring to a situation where the Democrats take control of both the White House and Congress. “The trade is very much indicating that someone believes that we’ll get the push for a Democratic Senate.”
Bets on a victory by Biden in the Nov. 3 election and a Democratic sweep of Congress have quickly become a scenario that investors can’t afford to ignore. While some analysts say the party’s proposed tax hikes may hurt corporate profits, others are focusing on the potential benefit from their agenda, such as a boost in fiscal stimulus.