This was a really big week in the stock market, and for the people who knew what they were doing one with significant gains. We all know that oil prices are down right now, but some of you may have missed the Fed increasing their interest rates. To add on to this same theme a budget deal was recently passed that had some very important issues covered in it. Not to mention the completion of COP 21. In short, if you had your money in anything Solar or Renewable then you had your money placed right. This week I was up nearly 5% in a matter of minutes because last Friday I picked up a few key solar Stocks. Including SunRun (8.30/share now over 13.00/share) and Real Good Solar (0.46/share now over 0.70/share).
The trend in solar for the past few years has been cheaper and cheaper, today it serves as a reasonable financial alternative to fossil fuels, not to mention the political climate. Because of this shift, oil prices are incredibly low in order to try and compete with the renewables industry, hence the refocusing on Fracking and new Drilling to try and really increase output. A strong blow to the oil industry was made however (at least within the US) in the repealing of the restrictions on oil exports from the US. You may think that this would be to the advantage of the Oil companies, however the supply in the US being kept artificially high, and the price being kept artificially low, is one of the only things that was keeping oil in the game. An expansion to other foreign markets will mean an increase in the price of oil, meaning that new developments will have more of a financial incentive to choose renewables including solar (which is the big player in renewables right now). Speaking of financial incentive, renewable energies tax breaks were extended meaning a double whammy for the oil industry. In the short term the oil industry may be able to get away with their profits from foreign markets, but the decisions made during COP 21 may suggest that they will not have the same success that they may have expected in the past.
While the fed hike normally creates an overall slowing in the market due to banks increasing their rates for loans, it may not have as large of an effect of the every day consumer as people might think. The impact on business will be moderate, but in an up market they may just be thinning profits rather than making losses. For the every day person, they will see a slight increase in their mortgage, but most people nowadays are sticking to fixed rates meaning only new home buyers will really see a difference. But how many new home buyers are there today? Not many is the answer, millennials have largely been avoiding the home market due to a significant rate of unemployment and underemployment, meaning it will only slightly impact the average consumer. Taking into consideration the increase in foreign investments in US real estate the normal ding in the real estate business you might expect may be subsidized by outside forces, meaning real estate companies may do well despite the interest rate hike.
The perception of the real estate market, that it might take a hit due to the interest rate, may make it a prime market to buy into right now due to it being undervalued. While you may have missed out on the solar explosion this Monday, it is likely not too late to reap the long term gains that will be made in the coming year.