Line chart compares the indexed value of clean energy stocks with that of fossil fuel stocks.
Y-axis: Indexed value (indexed to 100 on 1/1/2014); X-axis: 2014-2022.
Both clean energy and fossil fuel stocks tracked similarly in 2014, roughly between an index value of 83 and 115. By May of 2015 clean energy stocks climbed to over 124 while fossil fuel stocks remained near 92. Clean energy stocks generally continued to outperform until November 2016, when fossil fuel stocks briefly surpassed clean energy stocks, rising above 91 in late 2016 when clean energy lingered near 79. From February 2017 to October 2018, the two indexes were roughly aligned between 74 and 102, with both indexes in the mid-80s by October of 2018. After that point, however, the index for clean energy stocks consistently outpaced that of fossil fuels, rising to more than 156 in February 2020 (vs. about 70 for fossil fuels), falling sharply to about 91 in March (vs. about 31 for fossil fuels, which also fell sharply), then rising precipitously to over 261 by November (fossil fuels near 50). As of year-end 2020 the clean energy index stood at just under 313 and the fossil fuel index at just over 52. By late September 2022, the clean energy index was near 219 and the fossil fuel index was near 104.
Sources: Bloomberg and Wells Fargo Investment Institute. Daily data from January 1, 2014 to September 30, 2022. Fossil fuel stocks are represented by the total return of the S&P Supercomposite Energy Index which measures those companies included in the S&P Composite 1500 that are classified as members of the GICS® Energy sector. Clean energy stocks are represented by the total return of the S&P Global Clean Energy Index which measures the performance of global companies that represent the listed clean energy universe. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results. Equity securities are subject to market risk which means their value may fluctuate in response to general economic and market conditions and the perception of individual issuers. Investments in equity securities are generally more volatile than other types of securities.
Key Takeaways
- After years of being “dead money,” fossil fuel stocks finally began to bounce in late 2020. At the same time, clean energy stocks took a well-deserved breather after substantial gains.
- Renewables appear to be the future, but investors should keep in mind that the transition will likely take decades. Traditional energy companies could, at times, offer good value and outperform.