Chart of the Week - Green Boom & Bust

This email provides a look at what we covered in the latest Weekly Insights report

The Weekly Insights Report is part of our entry-level service: presenting some of the key findings from our institutional research service.

Chart of the Week - Green Boom & Bust

Renewables vs Fossils: The relative performance of clean energy vs fossil fuel stocks has featured some wild boom/bust cycles over the past two decades. The current stage of the cycle is well and truly in the bust stage following a major boom phase.

The magnitude of changes in relative performance is stark. The relative performance line gained +500% from the 2018 lows to the 2021 peak, and has since dropped almost -70% from that point (that compares to -72% from the 2001 peak and -90% from the 2008 peak). Big moves, and a lot of alpha if you were on the right side of those seismic shifts!

Going forward, there will likely be some upside for renewables spurred on by substitution effects should fossil fuel prices remain elevated. Both crude oil and natural gas appear to be in the process of establishing a higher base: if prices do find a new higher range, demand for alternatives likely increases with clean/alternative energy being a benefactor as commercial viability improves. There is likely also something to be said about energy security.