Funny story. I sat down to write this column as I began to watch the election results come in. I was going to write about the likely energy policies of Hillary Clinton's administration. I essentially had this column all worked out in my head.
Then I started to see the gap start to close in Florida and North Carolina. I saw Clinton struggling in states she should have been winning handily. I decided to hold off on writing any more. Once I saw her struggling in Pennsylvania, I knew that she was in big trouble, and I started to ponder a Trump presidency a lot more seriously.
I would be remiss not to acknowledge that I predicted a Clinton win nine months ago. That is now the first of my 2016 energy predictions to be proven wrong. Wrong though it was, it almost panned out. In fact, Clinton did get more popular votes than Trump, and we can all wonder how things might have turned out if not for FBI Director James Comey's letter to Congress 10 days before the election rekindling suspicions about Clinton's mishandling of classified information in her emails, which immediately hurt her poll numbers. Nevertheless, we don't elect on the basis of the popular vote, and to be honest I didn't think it would be all that close.
It is ironic that Clinton lost Pennsylvania. This is a state that highlights one of the biggest problems many people had with her as a candidate. When Clinton was secretary of state she promoted hydraulic fracturing by American companies abroad after seeing firsthand how this technology spurred a surge is U.S. energy production. But amid a tough primary fight against Sen. Bernie "I will ban fracking" Sanders, Clinton was forced to move left. She started equivocating on fracking as well as on the Keystone XL Pipeline, which garnered a favorable review from the State Department under her leadership.
It just so happens that Pennsylvania is ground zero for the U.S. shale gas revolution, and while her backpedaling on fracking certainly pleased her environmentalist supporters, it didn't help her in Pennsylvania. That's what happens when you try to please everyone. At some point, you simply can't. In this case, Clinton's most recent stance may have cost her enough votes to deliver the state to Trump.
So now that we know we will have President Trump, what does that mean for energy investors? I began this discussion last week, but the bottom line is that a Trump Administration should be bullish for domestic energy stocks. His policies will be friendly to fossil fuels. Trump is being advised by business people like his longtime friend Harold Hamm, the CEO of Continental Resources (NYSE: CLR) who's being mentioned as a leading candidate to become energy secretary.
Trump will try to stem the tide of new regulations while rolling back old ones. Oil, gas, and coal production is likely to be higher as a result than would have been the case under Clinton. We should also see more pipeline projects backing that production. Trump has pledged to take seven actions "to protect American workers" on his first day in office, and one of these would "lift the Obama-Clinton roadblocks and allow vital energy infrastructure projects, like the Keystone Pipeline, to move forward. The midstream sector should really thrive amid higher energy output and greater regulatory certainty.
As I mentioned in the previous column, Trump won't be able to save the coal industry. But he can certainly make good on his promise to kill the Obama Administration's Clean Power Plan, which would phase out a large proportion of coal-fired power plants over the next 20 years. That won't save coal, but would slow its decline.
Regular readers know that I generally avoid coal investments, but in the previous issue of The Energy Strategist we recommended three coal producers not getting anywhere near their due after the deep recent slump. Yesterday, these recommendations gained 10%, 14%, and 24%. We certainly weren't predicting a Trump win, but the medium-term market outlook for coal has improved dramatically as a result.
The fossil fuel industry in general cheered Trump's win, and regardless of your feelings about the man or his policies in other areas, he's been clear about promoting the domestic energy sector. Renewable energy producers, on the other hand, could miss the support of Obama and Clinton. As with coal, the political shift probably won't be decisive in the long run, but it could certainly alter the near-term growth rate.
We are going to be analyzing the investment implications of Trump's win in much greater detail in the weeks and months ahead. Consider subscribing to the Energy Strategist and MLP Profits for actionable advice that will help you profit from this shocker.