Charting a Comeback: Is Renewable Energy Entering Its Second Wave?

You might say this week’s chart is displaying renewed energy…

It’s yet another breakout —and one which follows on from a classic boom-bust cycle that kicked off in the final phases of the first Trump presidency (and now finds a surprising renewed bullishness in Trump’s second go).

We’re of course looking at Global Renewable Energy stocks.

After coiling into a symmetrical triangle, we’ve seen a breakout, and this is interesting because it echoes several important investment themes…

• ESG Backlash Back-off: You can basically track the ESG backlash of the past couple of years in the data (Google) search interest, Carbon prices, fund flows), and the interesting thing is that I would say the backlash is done. Interest is picking up again, and while it might be done differently going forward, ESG is here to stay, and today’s chart in many respects represents some of the renewed life it’s having.

• Presidential Sentiment Signals: the 2020/21 boom-bust cycle in renewable energy stocks peaked almost bang on with the Biden inauguration; meanwhile, renewable energy stocks are now breaking out under Trump. Ironic given the opposing stances those two have on renewable energy and a telling lesson in markets and sentiment.

• AI Energy: I think it is fair to say some of the renewed interest is coming from the anticipated and actual surge in energy demand from AI and data centers.

• Energy Transition and Capex Boom: but also the Great Electrification going on globally as more countries push forward on the energy transition, EV adoption ticks up, and robotics +AI make strides.

• Speculation Rejuvenation: and let’s face it, another key facet is the renewed speculative fervor taking hold across markets. It’s the more blue-skies and story-driven areas of the market, like renewable energy, that get most easily swept up in waves of rising speculation and risk appetite.

• Global Equities Bull Market: As I explain below in the bonus chart, it is increasingly clear that a new bull market is taking hold; particularly in global stocks —it’s only natural that a rising tide floats this boat.

So it’s a fascinating chart. Just by itself from a market technician standpoint, it looks great, looks like one of those fabled big breakouts… but also fascinating because of the various themes and trends that it represents.

As to how sustainable it is, I would keep an open mind — there’s definitely a macro-fundamental case to be made, and again from a technical standpoint, it looks great, so it’s not something I would be betting against.

Key point: Renewable energy has gone from boom to bust, and now breakout.

Bonus Chart — Global Bull Market Count

Following on from the above, as alluded to, there are more and more signs of a new cyclical bull market in global equities. Adding to the list this week is the rapidly growing count of “bull markets” — in this case operationalized as the percentage of stock markets that are up at least 20% off their 52-week low.

The latest reading for this indicator (which tracks the main equity benchmark of 70 different countries) is 61%, which is the highest reading since 2021.

This comes on the back of a falling US dollar, global rate cut rush, big sentiment reset and positioning shakeout back in April, and still cheap valuations for most of the world’s stock markets. In other words, it’s more than just fun with charts

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