In today’s issue:

  • Politics and markets don’t always move in lockstep
  • Trump sees a golden era for fossil fuels, should investors follow?
  • In the game of global trade, China is being given a free win

President Donald Trump has declared energy independence a cornerstone of his administration, vowing to unleash the full might of America’s fossil fuel reserves.

Wind farm approvals are on hold, the US has exited the Paris Agreement (again) and Trump promises to make America the global energy powerhouse.

But let’s pause for a moment – how much more can fossil fuels deliver?

Under President Joe Biden, fossil fuel generation already hit record highs. This was driven by surging natural gas exports, expanding oil production and skyrocketing demand as economies reopened post-Covid.

Major fossil fuel companies like ExxonMobil (XOM) and Chevron (CVX) thrived, generating historic profits. Yet, as the following chart comparing fossil fuel companies (using the Energy Select Sector Fund (XLE)) to clean energy firms (using the iShares Global Clean Energy ETF (ICLN)) reveals, political goals don’t always translate to investment outcomes:

Source: Koyfin

The takeaway? Markets often have a mind of their own. Despite Biden’s pro-renewable stance, fossil fuel stocks thrived. Now, as Trump promises a “golden age” for fossil fuels, there’s no guarantee that narrative will align with market performance.

In fact, renewable energy is already proving itself – quietly and decisively. So far in 2025, renewable sources like wind, solar and hydro have met over 100% of California’s energy demand for part of the day on nearly half of January’s days.

This isn’t a result of federal policy or government mandates. It’s the private sector driving change, fuelled by technological advancements and falling costs.

UK renewable energy: a mixed picture

Closer to home, the UK renewable energy landscape is also more complex than headlines suggest. Reports of wind and solar providing tiny percentages of our power have led to fears of blackouts and spooked some investors.

Meanwhile, a recent profit warning from Ørsted (ORSTED), citing rising costs and delays in offshore wind, have added to the concerns.

But claims that renewables increase blackout risks are misleading. In reality, the risk of blackouts this winter has fallen to its lowest in four years thanks to the rise of the country’s renewable energy capacity. The National Energy System Operator (NESO) – the company in charge of keeping the lights on – predicts that the UK’s winter power supplies will outpace demand by nearly 9% year on year.

The boost in the power supply margin is supported by the recent deployment of large-scale battery storage projects, small-scale renewables and imported electricity, including from Denmark through the new Viking power link, according to NESO.

The grid is adapting to the intermittent nature of renewables with advanced forecasting, demand-side response systems, technologies like grid-scale batteries, and, yes, the use of back-up capacity.

Ørsted’s profit warning caused a stir, but it reflects global challenges like rising material costs and logistical hurdles rather than a collapse of the sector. The UK remains the world’s top offshore wind market, with projects like Dogger Bank set to bolster capacity significantly by 2026.

Why politics may matter less than you think

The renewable energy boom in California underscores a crucial reality: energy markets are increasingly shaped by economics rather than politics. Solar and wind power costs have plummeted over the last decade, making renewables the cheapest source of electricity in many parts of the world.

Even energy storage – a traditional bottleneck for renewables – has seen rapid advancements. Battery costs have fallen by 90% since 2010, enabling grid operators to store surplus solar and wind energy for use during peak demand.

Meanwhile, corporate America is doubling down on renewables. Major companies like Amazon (AMZN), Google (GOOG) and Apple (AAPL) are investing billions to achieve 100% renewable energy for their operations. This private-sector momentum is transforming the energy landscape, regardless of who occupies the Oval Office.

And yet, there’s one notable exception to this trend: Elon Musk.

Even Elon Musk seems conflicted

Back in 2017, Elon Musk made headlines when he publicly criticised Trump’s decision to exit the Paris Agreement, tweeting: “Leaving Paris is not good for America or the world.”

Musk even resigned from Trump’s advisory councils in protest, positioning himself as a staunch advocate for climate action.

Fast-forward to 2025, and Musk’s stance seems to have shifted dramatically. Now a prominent member of Trump’s pro-business advisory group, Musk appears to have embraced a more pragmatic approach.

This newfound alignment with Trump has coincided with a surge in the stock price of Tesla (TSLA), which is up 75% in just a few months. But Tesla’s success under Trump raises questions: how sustainable is its “virtue premium”?

For years, Tesla thrived as the ultimate climate-friendly status symbol. Its customers didn’t just buy cars, they bought into a vision of a greener future. Yet, as Musk’s public image grows more divisive, Tesla’s appeal as a climate champion is waning.

Tesla’s fundamentals also tell a more sobering story. For the first time in 14 years, Tesla’s annual vehicle deliveries have declined, casting doubt on its growth narrative.

Meanwhile, Chinese EV giant BYD (BYDDF) has overtaken Tesla to become the world’s largest EV seller. Despite its dominance, BYD (in red) trades at a fraction of Tesla’s valuation (in blue), with a price-to-earnings ratio (P/E) of just 18 compared to Tesla’s 137.

Tesla (blue) v BYD (red), price/earnings ratio
Source: Koyfin

For investors, the question is clear: can Tesla maintain its lofty valuation in an increasingly competitive EV market? Or is it time to look eastward for better opportunities?

China’s clean energy dominance

While Trump doubles down on fossil fuels, China is racing ahead in clean energy – and the numbers are staggering.

In 2024 alone, China installed:

  • 80 GW of wind capacity (totalling 521 GW)
  • 277 GW of solar capacity (totalling 887 GW)
  • 5 GW of hydro capacity (totalling 436 GW)

China achieved its 2030 renewables targets six years ahead of schedule. It’s now the undisputed global leader in clean energy production, outpacing the US by a wide margin.

But China’s ambitions don’t stop at production. The country is also dominating the clean tech supply chain, from solar panels to EV batteries. CATL (300750.SHE), the world’s largest EV battery manufacturer, exemplifies this trend.

CATL has grown its revenues by an astonishing 750% between 2019 and 2023. It now plans a $5 billion secondary listing in Hong Kong, which would be the region’s largest initial public offering (IPO) since 2021. Despite its rapid growth, CATL trades at a relatively modest price/earnings ratio (P/E) of 23 – far below Tesla’s 100+.

For investors, CATL represents a compelling opportunity. The company’s dominance in the battery market, combined with its plans for international expansion, positions it as a key player in the global energy transition.

The US risks falling behind

Trump’s focus on fossil fuels risks ceding a major advantage to China, which is rapidly establishing itself as the leader in clean energy and electric vehicle (EV) production.

This isn’t just about environmental policy – it’s about economic competitiveness. The global energy transition is reshaping industries, creating new markets and driving innovation. Countries that lead in clean energy technologies will gain a significant edge in the 21st-century economy.

China’s investments in renewable energy, EVs and battery technologies are already paying off. Its clean tech sector is growing at an unprecedented pace, attracting billions in investment and creating millions of jobs.

By contrast, the US risks falling behind. While Trump’s policies may boost fossil fuel production in the short term, they do little to address the long-term trends reshaping the global energy landscape.

What this means for investors

For investors, the implications are clear: don’t get caught up in the headlines. Markets often defy political narratives, as evidenced by the performance of fossil fuel and clean energy stocks under Biden.

Instead, focus on the underlying trends. Trump’s energy agenda may boost sentiment for US fossil fuel stocks, but the global clean energy transition isn’t slowing down.

Renewable energy is here to stay, driven by falling costs, technological advancements and private-sector innovation. In fact, beaten-down clean energy stocks might offer the best opportunities for outsized returns. Meanwhile, China’s dominance in clean tech offers compelling opportunities for investors willing to look beyond the US and Europe.

With that in mind, here are some ideas of where investors should be looking:

  • Chinese clean energy stocks: companies such as BYD and CATL are leading the charge in EVs and battery technologies. Despite their impressive growth, these stocks trade at far lower valuations than US counterparts like Tesla, making them attractive options for value-oriented investors.
  • Renewable energy ETFs: funds like ICLN offer broad exposure to the clean energy sector, including solar, wind and energy storage companies. With clean energy stocks currently undervalued, this could be an opportune time to invest.
  • Emerging markets: countries across Asia, Africa and Latin America are ramping up investments in renewable energy. Companies operating in these regions could benefit from substantial growth opportunities.

The bottom line

Trump’s energy agenda may boost sentiment for US fossil fuel stocks in the short term, but the long-term trends are clear: the global energy transition is unstoppable.

In fact, beaten-down clean energy stocks, particularly in China, might offer the best opportunities for outsized returns.

History has shown that markets often defy political intentions. Under Biden, fossil fuels soared. Under Trump, the real opportunities may lie in the very areas that seem least likely to benefit – clean energy and Chinese stocks.

The bottom line? Don’t get caught up in the headlines.

In investing, the biggest returns often come from betting against consensus. With clean energy and Chinese equities trading at depressed valuations, now could be the perfect time to go where others fear to tread.

Until next time,

James Allen
Contributing Editor, Fortune & Freedom