Several months after finishing an interview with Kazakh journalist Borat Sagdiyev’s daughter Tutar, Rudy Giuliani was again caught in a bizarre moment. This time, he jokingly accused Joe Biden of voting 50 times or even 5,000 times for himself. Clearly, that’s not the case as Biden can’t even count to 50, let alone 5,000. Yet this erosion of collective political sanity is what poses challenges for Sunrun (NASDAQ:RUN) stock in the nearer term.
Allow me to explain. Weeks before the election, I argued that a possible blue wave could signal more green for Sunrun stock. Much of my thesis revolved around a cynical dynamic. With Democrats taking complete control of the government (save for the Supreme Court), they may do what Democrats do best: Raise taxes.
And that has strong implications for Sunrun stock because its underlying business of solar energy panels and energy storage systems are located in states that feature significant sunlight, states that millennials prefer. Indeed, out of the 10 states that SmartAsset.com labeled as the top destination spots for young people, Sunrun covers six of them.
Further, it’s patently obvious why young folks are moving there. Take Los Angeles as an example. The median home price is nearly $700,000, while the median cost in California is just under $553,000. Either way, these figures are absolutely ridiculous. You can get a very nice home by moving a few hours away in Las Vegas, Nevada.
Certainly, the high taxes that California Democrats — which I call a special breed of elitist stupidity (aka Nancy Pelosi) – will impose will send more people rushing for the exits. Don’t believe me? Look at all the folks fleeing New York thanks to the brilliance of another set of coastal elitist Democrats. But this benefits Sunrun stock as people flee to the cheaper regions of the Sun Belt.
However, what could stem the tide is political uncertainty. That blue wave that everyone was talking about? So far, it hasn’t panned out.
Sunrun Stock in a Moment of Uncertainty
As I write this, Joe Biden is prepping the next administration as President-elect. Of course, that’s not going to matter to current President Donald Trump. Dissatisfied with the results, his administration has signaled multiple efforts to contest the result.
If Trump wins, that could impair the narrative for Sunrun stock as his pro-business policies could spark the economy much faster than previously predicted, causing people to rethink their move-out plans. Also, a Trump administration would have every incentive to keep benchmark interest rates at rock-bottom levels. Otherwise, higher interest rates could possibly cause a housing collapse due to the loss of mortgage affordability.
However, that might be a very unlikely scenario. Instead, what’s more probable is that the Republicans keep control of the Senate. Of course, in the year 2020, we’ve learned to never say never, which is why I’m not saying it. But from my vantage point, it appears that a President Biden will not have the cooperation of the upper house of Congress. And that may not bode well for Sunrun stock.
Additionally, I’m concerned that a Republican-controlled Senate would not only have zero incentive to work with Biden but also have positive incentives (from their perspective) to work against Biden.
Here’s my thinking. Rather than a blue wave, we instead saw what you might consider a red mitigation. First, Republicans are presently holding onto Senate control. Second, they gained ground in the lower house.
What? As The Washington Post reported, centrist House Democrats lashed out at their far-left colleagues, blaming them for losses they shouldn’t have incurred. I’m not a political analyst but I’ve got to believe that the Republicans smell blood in the water. Therefore, the right can make gains in 2022, which would usher in full control for Donald J. Trump in 2024, if he wishes to run again.
Oh yeah. You’re not getting rid of this guy so quickly. For Democrats, this is like the plot of the original Star Wars but in reverse. It’s Darth Vader that is vanquished, only to become more powerful than ever. That may usher in economic vitality through Trump’s pro-business policies, which may or may not help Sunrun stock in terms of the migration narrative.
Wait a Bit for Clarity
At the end of my October article on Sunrun stock, I mentioned that a safer idea would be to wait out RUN until after the election. But in many ways, the election isn’t over. Not only do you have an ideological civil war brewing between the Biden and Trump camps, we must wait for runoff elections in the Senate race to determine governance trajectory.
I wasn’t expecting this outcome as the polls indicated what I thought was the obvious: most Americans were tired of the ineffective governmental response to the pandemic. It turns out, roughly half of the country were more tired with Democrats than with a deadly virus.
While I still like the longer-term narrative for Sunrun stock, I think tactically, it’s best to wait this one out for a bit. In this highly variable year, we need at least some clarity.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.