President-elect Donald Trump plans to carve out a formal role for Tesla CEO Elon Musk as the co-leader of a newly formed Department of Government Efficiency.
Since the election delivered a resounding mandate for the GOP, shares of Tesla TSLA have traded up by more than 30%. Investors are betting that Musk’s newfound political power will benefit his company through deregulation at the federal level and new protections against state-level backlash focused on clean energy transition.
EV sales recently hit an all time high. Research at Sanford C. Bernstein led by Neil Beveridge provided composite global data for September drawn from multiple sources, arriving at 1.7 million EV sales in September worldwide.
Critically, Chinese EV demand reached a record high demand with sales that accounted for the lion’s share of those units sold, while buying rebounded in Europe with 67% and 19% of the global total for the month.
While Tesla reported robust earnings for the third quarter and rosy guidance for sales into 2025, legacy U.S. automotive companies stumbled with aggregate sales accounting for just 9% of world sales for September.
Global X Autonomous & Electric Vehicles ETF DRIV has rebounded since the election with a 2.5% rally that has narrowed its loss for the year-to-date to less than 3%. The fund’s portfolio is over half invested in EV makers and related materials. More than half of stocks held by DRIV are US based companies – with Tesla as the largest single position.
Meanwhile, the more industry specific focus of KraneShares Electric Vehicles & Future Mobility ETF KARS saw an initial surge in share price over the past week reduced sharply by a selloff of over 3% on Tuesday. The Fund’s total return for 2024 now stands at a decline of 9%. Stocks held by KARS are globally diversified with three Chinese EV producers among the top five portfolio allocations.
As global sales continue to expand, so does battery demand and the need for metals used in their manufacturing. Despite positive signals, investors in the sector have been disappointed. ETFs focused on battery transition have struggled in 2024.
Amplify Lithium & Battery Technology ETF BATT has lost nearly 10% of market value year-to-date. The stocks held by the fund include a 25% allocation to Chinese equities and 20% made up of U.S. Investors in BATT get a 41% direct exposure to EV makers and battery producers combined with direct exposure to nickel, lithium and other metals required by the industry. With only $73 million in assets, BATT has struggled to gain traction with investors.
The more established Global X Lithium & Battery Tech ETF LIT has retreated by 9% in 2024 so far. More than 65% of LIT’s portfolio is allocated to EV battery manufacturing and materials — with more than 40% invested in Chinese companies and 20% committed to US firms.
International
European stocks retreated moderately on Tuesday with the EURO STOXX 50 and FTSE 100 pulling back by 0.9% and 0.3% respectively. Asian stocks also traded lower with the exception of the Shanghai Shenzhen CSI 300which climbed higher as Chinese investors factor Beijing stimulus measures.
Sentiment in European markets remains anchored to U.S. election results. Bank of Finland Governor Olli Rehn, a member of the European Central Bank governing council, raised concerns Tuesday over a looming trade war with the U.S. In a grim overview of the threats facing European democracies, Rehn said that “a new trade war is the last thing we need amid today’s geopolitical rivalries, especially among allies.”
Rehn’s statements on EU monetary policy provided room for more cuts.
“The direction of rate changes is clear, but the speed and scope of rate cuts will depend on our overall assessment at each meeting of three factors: the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission,” Rehn said.
Impact
The two largest impact ETFs by market capitalization — iShares MSCI EAFE Growth ETF EFG and iShares ESG Aware MSCI EAFE ETF ESGD , sold off sharply in pre-market trading on Wednesday. EFG traded down by 1.86% while ESGD retreated by 1.75%.
Impact investors continue to weigh the impact of the recent election cycle and how overlapping federal and state laws may change the industry. According to Ballotpedia, 10 of the U.S. states with Republican-led executive and legislative branches have recently enacted legislation opposing ESG. Five of these states passed anti-discrimination laws that restrict banks and government agencies from using ESG scores while four of the states have limited public pensions and state university endowments from investing based on impact factors.
Meanwhile, four Democrat-controlled states passed measures protecting green and socially responsible investments by financial firms and public investors so far in 2024.
In a positive development for clean energy producers, Amazon.com AMZN and IKEA joined over 30 major ocean freight dependent firms on Tuesday to make a shift to near-zero emissions fuels. The Zero Emissions Maritime Buyers Alliance intends to use their clout as leading customers of maritime shipping companies to smooth the transition to cleaner power solutions for ocean transport.
