What a wild week…
The most attention-grabbing thing that happened? The storming of the U.S. Capitol when Congress was in session and in the process of confirming Joe Biden as the next President of the United States.
Talk about wild!
But – while that event may have dominated the news headlines, and rightly so – it was mostly a non-event for markets. They didn’t care.
Because something far, far more important happened this week. Something that will have lasting and significant impact on the economy and on markets.
That thing, of course, is Democrats flipping control of the Senate.
Democrats needed to win both Georgia Senate runoff elections to tie Republicans in terms of number of Senate seats, with the tie-breaker going to Vice President-elect Kamala Harris (who is, of course, a staunch Democrat).
They did just that. Both Democratic candidates won their runoffs in Georgia. Now, Democrats are in control of the Senate for the next two years.
They will also control the White House and the House of Representatives. Which means President-elect Joe Biden is now in a position of strength when it comes to enacting sweeping legislation that will meaningfully impact the U.S. economy.
Ostensibly, that may seem like a bad thing for markets, because Democrats want higher taxes and tighter regulation. But the stock market actually rallied big on the news.
The general thinking is that what Democrats want to do first (provide stimulus to combat Covid-19 economic impacts and combat climate change) is a net positive for the economy and financial markets. The higher taxes and tighter regulation part will come later. Maybe not even before the 2022 midterms, and even if it does, the split of power in Congress is so equal that any successful legislation on those fronts will very likely have to be moderate in nature.
Thus, Wall Street sees a “Blue Wave” as a win for the economy. You get guaranteed big stimulus now, and maybe moderately higher taxes and somewhat tighter regulation a few years from now.
Don’t be afraid of the Blue Wave … embrace it. The fundamentals underlying the U.S. economy and the stock market remain healthy and vigorous. The outlook for stocks to push higher both in 2021 and throughout the next several years remains robust.
With all that said, the Blue Wave is a particularly bullish development for three industries. Democrats flipping the Senate essentially propelled these three megatrends into hypergrowth mode – and now all three trends are positioned for several years of huge gains ahead.
Which industries am I talking about?
Solar, hydrogen and cannabis.
Solar energy adoption was already on a huge upswing before the 2020 Election. Falling costs, improving technology and shifting consumer demand all compelled homeowners and businesses alike to more seriously consider installing solar panels. Now, significant political catalysts are in the pipeline, too, as a Democratic-controlled government will almost certainly make it a priority to pass major clean energy bill in 2021. Meaningfully upping and extending solar subsidies will likely be the focal point of that bill.
In other words, the solar market is primed for several years of hypergrowth ahead.
The story on the hydrogen front is very similar. Hydrogen subsidies will likely also be significantly increased and extended in 2021-22. This major political tailwind will couple with economic tailwinds (hydrogen costs are steadily falling) and technology tailwinds (the emergence of “green hydrogen” has enabled a new era of zero-emission hydrogen production) to spark a boom in the Hydrogen Economy in the 2020s.
Pivoting to cannabis, this megatrend is all about legal developments. The demand is there. We know that. Just look at the black market for cannabis. That’s a $70 billion industry in the U.S. alone – and a multi-hundred-billion-dollar industry globally.
Thus, the cannabis megatrend isn’t about generating new demand for weed. It’s about transferring the already enormous demand for weed from the black market to the legal market. A Blue Wave, which paves a clear path toward federal cannabis legalization, is a huge step in this transfer of demand. It also comes on the heels of Canada federally legalizing cannabis, and Mexico doing so soon.
All in all, the geopolitical stage is set for enormous global cannabis demand to shift into the legal channel over the next decade. This seismic shift will power big gains in marijuana stocks.
Big picture: It’s time to get extra bullish on hypergrowth solar, hydrogen and cannabis stocks.
My top picks?
I like three stocks in each industry:
9 Hot Stocks to Buy Across 3 Scorching Megatrends
In solar, I like SunPower (NASDAQ:SPWR) for its unmatched leadership in the premium solar installation category, Maxeon Solar (NASDAQ:MAXN) for its strong technical expertise in manufacturing the world’s best solar panels and SolarEdge (NASDAQ:SEDG) for its dominance in the increasingly important solar optimizers and inverters market.
For hydrogen, I like Plug Power (NASDAQ:PLUG) as the Hydrogen Economy leader building on its early dominance in supplying hydrogen fuel cells to the materials handling market, Bloom Energy (NYSE:BE) for its ability to leverage fuel cells to help businesses generate sustainable and cost-effective off-grid power, and Ballard Power (NASDAQ:BLDP) because the company is emerging as a mini-Plug Power of sorts in the transportation market (providing fuel cells into transit end-markets).
Finally, in cannabis, I’m most bullish on Canopy Growth (NASDAQ:CGC) because of its multi-billion-dollar cash balance that gives it unmatched firepower to invest in the emerging marijuana industry, GrowGeneration (NASDAQ:GRWG) because this small retailer is rapidly turning into the “Home Depot of Cannabis” and WM Holdings (NASDAQ:SSPK) for its Weedmaps platform that is already established as the “Google of Marijuana.”
These nine stocks represent the highest-quality, biggest-upside plays on the solar, hydrogen and cannabis megatrends.
And each of those megatrends is ready to sprint into hypergrowth mode.
It doesn’t take a rocket scientist to connect those dots.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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