Street Calls of the Week
Investors tracking politics through energy ETFs are seeing a familiar split: fossil fuels lag while clean energy rebounds. Flows and performance favor utilities and nuclear as data center loads drive multi-year electricity demand.
Political cycles are driving clear swings in energy ETFs. Two funds have moved in opposite directions through recent administrations: XOP, the SPDR S&P Oil & Gas Exploration & Production ETF, and ICLN, the iShares Global Clean Energy ETF. Their performance shows how policy, rates, and demand shape energy markets in ways that do not always match headlines.
The Numbers Tell the Story
The data has been consistent. During President Trump’s first term from January 2017 to January 2021, XOP fell 57%, moving from $164.52 to $70.50, while ICLN gained 279%, rising from $8.29 to $31.40. This inverse pattern held despite pro fossil fuel rhetoric, including opening the Arctic National Wildlife Refuge to drilling and exiting the Paris Climate Agreement.
The Biden period brought a reversal. XOP rose 107% from $70.11 to $145.45, while ICLN declined 63% from $31.28 to $11.44. This occurred as the administration passed the Inflation Reduction Act, which included more than $450 billion for clean energy projects.
Nine months into Trump’s second term, the relationship has flipped again: XOP is down 14% and ICLN is up 44%.
Comparative performance of XOP (Oil & Gas, in yellow) and ICLN (Clean Energy, in blue) ETFs from 2017-2025, demonstrating their inverse relationship across presidential administrations
Why Policy Doesn’t Always Match Performance
It’s very counter-intuitive, but rhetoric and policy aims do not move prices by themselves. In Trump’s first term, the oil and gas industry faced oversupply from shale and, later, a collapse in demand during COVID. Clean energy, in contrast, benefited from falling technology costs and growing corporate procurement, even without supportive federal policy.
Under Biden, fossil fuel producers benefited from demand recovery and higher commodity prices after geopolitical shocks such as the Ukraine-Russia war. Clean energy stocks struggled with rising rates, which raised financed costs for capital intensive projects, and with questions about how durable incentives would be.
Where the Opportunities Have Shifted
The most durable gains have appeared outside pure commodity exposure.
Infrastructure over commodities
Energy infrastructure has drawn interest while exploration and production lag. As Paul Baiocchi of SS&C ALPS Advisors notes, the focus is moving from fuels to power delivery and the grid. The Energy Select Sector SPDR (XLE) has seen about $7 billion in net outflows year to date, while the Utilities Select SPDR (XLU) has taken in roughly $3 billion and has outperformed XLE by a wide margin.
A big driver is electricity demand. AI data centers could require as much as 50 gigawatts of new power by 2027. Utilities and grid companies tie returns to rate bases and regulated investment, which are less exposed to spot oil price volatility or election outcomes than exploration funds such as XOP.
Nuclear momentum
Nuclear is reentering the mix. Executive actions aim to increase U.S. nuclear capacity, and large technology firms are investing to power data centers. The policy framework treats nuclear as a matter of security and grid stability, which lowers perceived project risk.
The Critical Risks
Regulatory whiplash
Uncertain rules complicate multi year planning. Renewable developers cite tariffs on inputs such as copper and steel, shifting tax treatment, and permitting delays. Cliff Graham of Avantus said: "I can’t do what I want to do on a viable project, I need the rules and regulations in place." One global firm based in Paris cut planned U.S. investment by half due to policy instability. For investors, a sharp turn in policy after an election can strand capital in concentrated bets.
Inflation Reduction Act exposure
A repeal or curtailment of IRA tax credits could slow clean energy deployment by 57% to 64% over the next decade. This is a headwind for near term earnings, but it may also set up selective entry points for investors who expect the longer term trend toward electrification to continue.
A More Resilient Approach
Investors who only target the obvious winners under the current administration may miss the broader setup. As these examples show, it’s counterintuitive that XOP and ICLN have moved in the opposite direction of what you’d expect given the rhetoric from both parties (normally, we’d expect the opposite to occur, so it’s a good lesson for investors).
The utilities sector (XLU) and the nuclear supply chain are less dependent on which fuel is in favor at any given moment. These areas support the system regardless of whether oil, gas, wind, or solar leads output growth.
What to Watch Next
- Time horizon: Short holding periods suit politically sensitive, high beta energy exposures. Long holding periods in these segments can be volatile.
- Rate path: Higher real rates pressure capital intensive clean energy. Rate relief would ease financing for projects and could support a rebound in ICLN.
- Grid demand: Data center power needs remain the swing factor for utilities and grid equipment.
- Policy calendar: Track SEC, FERC, and Congressional timelines for rules, credits, and permitting reforms.
- Positioning: Flows into XLU versus XLE continue to signal investor preference for power over fuels.
Investors do not need to predict every election outcome to participate. Focus on demand for electricity, the pace of grid upgrades, and financing conditions. Those forces have driven returns across administrations and will remain central as the energy system scales to meet new loads.