You can make the argument that JinkoSolar (NYSE:JKS) stock is more than just an investment based off the U.S. presidential election. After all, while the POTUS is practically considered the most powerful person in the world, the world is more than just the U.S.
That’s especially true when you look at the broader economy. Interest in solar energy is not exclusively limited to Americans, theoretically giving JKS stock insulation from Washington’s drama.
Nevertheless, the charts don’t lie. On Nov. 3, as those who didn’t mail in their ballots headed to the polls, JKS stock enjoyed a solid performance, gaining over 2% from the prior day’s close. Based on the latest opinion polls, Democratic challenger Joe Biden had a commanding lead. Further, the disastrous federal government response to the novel coronavirus meant that President Donald Trump was on the defensive.
Yet once again, pollsters failed to accurate gauge the political and ideological sentiment of the country. For example, despite frequent charges of racism and discriminatory behavior, Trump outperformed with communities of color. Notably, NBC News reported that the president did better with Black and Hispanic voters than Republican challenger Mitt Romney in 2012.
More importantly, on election night, the momentum seemed to favor the incumbent. As a result, Democrats went to bed with an uneasy feeling in their stomach. Not surprisingly under this context, JKS stock suffered a steep 12% drop on Nov. 4.
So, don’t tell me that JinkoSolar wasn’t impacted by American politics. I’m not going to suggest that the Trump-versus-Biden matchup is the end-all, be-all for JKS. But clearly, the investor community was hoping for a certain outcome. When it appeared that things weren’t going their way, the solar energy firm suffered.
But now that it’s (reasonably) clear that Biden will win the election, this should be a no-brainer for JKS stock, right? Unfortunately, the narrative isn’t quite so simple.
JKS Stock Faces Some Bumpier Roads Ahead
On the surface, JKS stock gives the aura of a screaming buy. Mainly, the Biden plan calls for ensuring “the U.S. achieves a 100% clean energy economy and reaches net-zero emissions no later than 2050.” Obviously, that’s not going to happen without viable renewables, such as solar and wind.
In addition, we should remember that who the president is has significant implications for the environment. As the Washington Post stated, the Trump administration moved to strip protections from Tongass National Forest.
Make no mistake about it: for Biden to win the presidency was no small victory for the Democrats. And this is irrespective of what happens in the race to control the Senate.
However, for Biden to really push the green agenda, he’s going to need full control of the government. Otherwise, a Republican-controlled Senate will stymie the Biden administration at every turn. Likely, this would not be helpful for JKS stock.
Therefore, all eyes are now on Georgia, where we will see two runoff races. For Democrats, the only realistic path to control is to win both races. Anything is possible given the crazy year we’ve had. However, it’s very unlikely as Georgia has a strong history of conservative senators.
Perhaps the lingering hope that somehow, the Democrats can pull out a miracle is what keeps JKS stock in an elevated consolidation pattern. But if they fail, JinkoSolar might risk a sizable correction.
I acknowledge again that the U.S. market is not the only one for JinkoSolar. As our own Larry Ramer pointed out, China and the European Union are moving ahead with large carbon reduction plans. Whether Biden won or lost wouldn’t get in the way of this initiative across the Atlantic.
However, the U.S. is holistically the most important market. Keep in mind that in many parts of Europe, average sunshine hours per year is less than 1,800. However, most of the U.S. averages at least 2,500 hours, with states like California, Nevada, and Arizona getting well over 3,000 hours.
That’s the other reason why JKS stock tracks U.S. politics. When you’re dealing with an intermittent energy source, you need as many viable hours as possible.
Frustrating to Call
Based on the available evidence, to really get a clear picture of JKS stock, we’d have to know who Georgians will elect as their U.S. Senators. Probability-wise, I’d say that Biden will contend with a Republican-held Senate. In the nearer term, that’s not going to be conducive for JinkoSolar.
Nevertheless, it’s very possible that JKS could be in a consolidation phase prior to the next leg higher. In my opinion, JinkoSolar has charted what appears to be what technical analysts call a continuation pattern. Essentially, it’s a three-fold formation: an initial spike upward, a consolidation period, followed by a breakout move higher.
The challenge here is that some of the fundamentals seem to contradict bullishness. But put my feet to the fire and this is what I’ll say: if you’re optimistic, take a small position now but keep the powder keg dry. In case my technical interpretation is wrong, you’ll have plenty of funds to advantage a discount.
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.