Citi thinks there's a new era for green stocks. Here's why

In a note from Citi, US equity strategist Drew Pettit claims the market will be entering a new era of green investing as the Federal Reserve begins to lower interest rates. As interest rates lower, the fortunes for infrastructure for clean energy could rise.

Pettit joined Market Domination to give insight into green investing and why it may be a new era for green stocks moving forward.

"So lower rates should help kind of green and clean again... but I do think longer term we actually see a fundamental inflection in these stocks where growth should re-accelerate and growth should outpace that of the broader market. So short-term catalysts to get us back in, longer-term catalysts for some sustainability of performance of these names," claims Pettit.

Pettit believes industrial sector will certainly have a part to play in this new era: "I actually think industrials play a huge part of the green transition. So when you think about all of the processes to make the things that we use every day, we need to change manufacturing processes. We need to make those processes better so we can use our resources effectively. So industrials are a massive part of the green revolution."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Nicholas Jacobino

Video Transcript

A new era of green energy is here according to city investors may find attractive opportunities for the taking amid a quote, focus on cash generation and visible visible profitability here to break down the green investing landscape.

We've got city us equity strategist drew Pettit Drew.

It's good to see you as always.

I guess my first question to you is why now, right, we have seen a pull back in a lot of these so called green names uh over the past year or so.

Do you think now is uh is that because is that why I should say you guys are coming in and sort of taking another look at this uh area?

So looking at stocks just being down is probably not a good reason to think about reengaging them.

So it's, it's all about the catalyst.

So how do we get performance to reverse?

I think we're nearing an election.

I think we're pricing out some tail risk fears there and we're nearing a fed pivot point.

So lower rates should help kind of green and clean again.

But then on top of that, so those are kind of two, let's call it short term catalysts.

But I do think longer term, we actually see a fundamental inflection in these stocks where growth should re accelerate and growth should outpace out of the broader market.

So short term catalyst to get us back in longer term catalyst for some sustainability of performance of these names.

Drew.

When you talk about green investing and green stocks, how do you define those terms?

Drew?

What are the variables?

So for us, it's not about being necessarily a disrupter or a pure play.

I don't need to be, let's call it like a solar panel company.

We are looking for companies across the value chain that helps support, let's call it cleaner use of energy, better use of resources.

So to us, we want a broader definition because we're not just gonna go from where we are today to this ultimate change in the future without some type of transition phase in between.

And I think that's where there's a lot of opportunity to invest right now.

And, and I, I think that's what a lot of people miss when they think about greed.

And so uh when you uh open that aperture, so to speak, what other types of criteria do you incorporate?

What other types of industries perhaps do you incorporate?

So I actually think industrials play a huge part of the green transition.

So when you think about all of the processes to make the things that we use every day, we need to change manufacturing processes, we need to make those processes better so we can use our resources effectively.

So, industrials are a massive part of the green revolution.

It's not just tech, it's not just EVs it's not just solar, there's nuclear.

I would say there's energy efficiency and even thinking about a resource like water, which I feel like we didn't talk a lot about in the past cycle.

Drew.

You mentioned politics.

I wanna just dig into that a little bit more.

How much does it matter?

Uh Who's in the White House?

Oh, next question.

No, I'm teasing.

Um Honestly, I everyone thinks a dam being in the White House is going to be really great for Green.

The problem is in, in that scenario to us, you probably don't have a democratic sweep and even if you do, I think deficit spending gets really difficult.

So to us, yeah, green might like a little bit more blue in the White House or in politics.

But honestly, on the red side of things, I think if you make deregulation pushes more aggressive, that actually does support some areas of green like nuclear.

And if you look at the Ira for example, that's benefiting a lot of red districts.

So to us, I think some of the fears politically are overblown for green, but in, but honestly, some of the tail risks are coming out.

So again, I I think supportive after we get kind of past that hurdle in November and Drew just to be clear here when you say, and this has been widely reported that some of those aspects of the Ira have been beneficial to red states.

Does that mean you don't think that those parts of the Ira are likely to be rolled back under any kind of election scenario?

No, we, we don't think so when it comes back to at the end of the day, it it's not just the end pure play clean energy companies that benefit from this.

It's the industrial complex.

So, no, we don't think Ira S get rolled back.

Maybe it gets de emphasized in the media and maybe they don't talk about it as much.

But uh again, not in our base case.

So I don't think things are going to be as bad as some people might think in that scenario.

Drew always good to have you join us.

Thanks so much.

Oh, thanks for having me.