Assessing Solar ETFs in a Post-Election US Energy Landscape: Strategic Positioning Amid Trump's Policy Shifts

The 2024 U.S. presidential election has reshaped the energy sector's trajectory, with Donald Trump's re-election signaling a stark pivot toward fossil fuels and regulatory rollbacks. For investors in solar exchange-traded funds (ETFs), the implications are profound. Trump's “Unleashing American Energy” executive order, coupled with the One Big Beautiful Bill Act, has accelerated the phase-out of tax credits for solar and wind projects by 2027 and imposed tariffs on critical materials like steel and copperTrump Election Win Puts Energy ETFs in the Spotlight^[1]. These measures, alongside the suspension of offshore wind permits and the centralization of renewable energy permitting under Interior Secretary Doug Burgum, have created a climate of uncertainty for clean energy marketsThe Impact of Trump's Energy Order on Solar Power^[2].

Policy Shifts and Immediate Market Reactions

The Trump administration's emphasis on “drill, baby, drill” has already triggered volatility in solar ETFs. Following the election, the iShares Global Clean Energy ETF (ICLN) and Invesco Global Clean Energy ETF (PBD) fell by 7.3% and 6.3%, respectively, as investors recalibrated portfolios to favor fossil fuel energy funds like the Energy Select Sector SPDR Fund (XLE), which surged 4% post-electionU.S. Energy Growth Opportunities Under Trump (2024–2030)^[3]. This shift reflects a broader reallocation of capital toward sectors perceived as politically insulated, such as oil and gas, while renewables face headwinds from policy-driven uncertainty.

The phase-out of federal tax credits under the One Big Beautiful Bill Act is particularly concerning. According to a report by Bloomberg, the elimination of investment and production tax credits by 2027 could reduce U.S. solar installations by 30% compared to pre-2024 projectionsUS solar installation forecast slashed due to Trump policies, …^[4]. The Solar Energy Industries Association (SEIA) has warned that these rollbacks, combined with tariffs on imported solar panels, could stifle innovation and delay cost reductions that have historically driven sector growthThe solar industry’s top 10 priorities for Trump^[5].

Historical Resilience and Long-Term Considerations

Despite these challenges, solar ETFs have demonstrated resilience in past policy cycles. From 2014 to 2024, the Invesco Solar ETF (TAN) returned 16%, while ICLN delivered 50%, suggesting that long-term fundamentals—such as declining technology costs and global climate commitments—remain intactThe best- and worst-performing energy ETFs of the …^[6]. However, the sector's performance under Trump's administration has diverged sharply from this trend. ICLN, for instance, has plummeted 60% since 2020, reflecting the fragility of clean energy investments amid regulatory reversalsClean Energy ETFs: From a 50%+ Crash to a Potential Comeback^[7].

A key factor in the sector's potential recovery lies in state-level policies and private-sector momentum. California, New York, and Texas continue to expand renewable energy mandates, while the Inflation Reduction Act's $369 billion in clean energy incentives provides a buffer against federal rollbacksTrump is President: What’s Next for Clean Energy ETFs Investors ...^[8]. Additionally, private equity and corporate sustainability goals are sustaining demand for solar infrastructure, particularly in onshore wind and distributed energy systemsSolar Under Trump: What To Expect In 2025^[9].

Strategic Positioning for Investors

For investors seeking to navigate this volatile landscape, diversification and hedging are critical. Energy ETFs like XLE and the Vanguard Energy ETF (VDE) offer exposure to fossil fuel beneficiaries, but their performance may be tempered by long-term energy price trends. Conversely, renewable energy ETFs such as ICLN and TAN require careful risk management, given their sensitivity to policy shifts.

Academic research underscores the value of adaptive strategies. A study published in Energy Policy found that green portfolios outperformed fossil fuel counterparts in conditional climate risk scenarios, though short-term volatility remains a hurdlePerformance of energy ETFs and climate risks^[10]. Investors are advised to prioritize ETFs with diversified holdings across renewable technologies and geographies, such as the iShares Global Clean Energy ETF, which spans solar, wind, and hydroelectric powerThe 5 Best Renewable Energy ETFs for Maximum Impact Investing in 2025^[11].

Innovative models like Energy-as-a-Service (EaaS) and localized manufacturing could also mitigate risks. Companies that reduce reliance on federal subsidies—such as First Solar and Sunrun—have shown earnings resilience despite policy headwindsPeeking Into Solar ETFs Amid Trump Administration^[12]. Furthermore, aligning with firms that integrate climate risk preparedness into operations may enhance long-term returnsSustainability and ESG investments will keep expanding under Trump^[13].

Conclusion

The post-election energy landscape presents a dual challenge for solar ETF investors: short-term policy-driven volatility and long-term structural opportunities. While Trump's agenda prioritizes fossil fuels, the renewable sector's resilience—bolstered by state-level incentives and private-sector innovation—suggests a path forward. Strategic positioning requires a balance of hedging against regulatory risks and capitalizing on the sector's enduring growth drivers. As the administration's policies unfold, investors must remain agile, leveraging diversification and sector-specific insights to navigate this dynamic environment.