Each new year, I reflect on the year that just ended by replaying it month by month. March 2020 was a wild, shocking month for everyone. My wife and I also welcomed a baby girl into the world on March 9th and were in a hospital in NYC when the world was seemingly falling apart. The self-induced lockdown was planned in many ways for me and my family, but clearly life never resumed as we expected it would after a month of bonding with the baby.
As I reviewed the numbers for year over year passenger vehicle miles driven in 2020 vs 2019, the numbers did not surprise me. There was a 40% year over year decline in passenger miles driven in April, and much of the remainder of the year the declines versus 2019 were between -13% and -9%. Then it dawned on me, less driving means less pollution… remember all those side by side pictures of cities around the world showing the clear skies and lack of pollution? Pictures quickly spread of cities around the world and still pollution levels are down considerably since the lockdowns in March and US greenhouse gas emissions for 2020 fell 10% to their lowest level in thirty years!
As a result of the COVID-19 induced lockdowns, the US is surprisingly on track to meet its Paris Agreement goals of 26-28% below 2005 emission levels by 2025. While that pace is not likely to remain the same as the economy reopens and more vaccines are administered each day, hopefully some paths we were on were given a much needed pause and some time to breathe, pun intended.
Since the November 2020 presidential election, “green” stocks, or anything close to a renewable energy related company, have been hotter than the sun. The reason for this performance is that one of Biden’s campaign pillars was plans for a clean energy revolution. While there is plenty of legislative and regulatory hurdles in the months and years ahead, let us leave the debating in Washington for a moment.
What is interesting is that “Big Oil” giants and “Green Energy” company stocks have both been performing exceptionally well since Biden’s election. QCLN (First Trust Clean Edge Green Energy ETF) and XLE (SPDR Energy Sector ETF) are both massively outperforming the majority of US stocks. While the “Green” stocks may be rallying due to optimism of what lies ahead for that industry, traditional, “Big Oil” stocks may also have some reason to be optimistic. While most can admit that solar panels, wind and water turbines, electric cars and busses, and even bio fueled passenger planes could be in our future, vaccinations and a return to normal soon, could mean that more people commuting again, flying for vacations and a general resumption of our daily lives.
Time will tell if this bounce in traditional energy stocks is just a short-lived, last gasp for fresh air (again with the pollution puns, Adam!) and whether clean energy stocks will be met with the harsh reality of Washington, D.C. legislation and the rally will pause, but it has certainly been entertaining to watch these groups move in tandem.
