Chart of the Week - Bulls and Breakouts
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 different 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 datacenters.
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.
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