Market Musings 050725: looking for contrarian ideas
Video and report: Investment Strategy Focus July 2025
3 Contrarian Themes:
Clean Energy, Health care, European Dividends
1. Clean energy: What went up then came back down
The clean energy and energy transition themes (including solar and wind power) were very popular in the years leading up to 2021, leading to huge outperformance in 2019 and 2020 for clean energy ETFs.
2019-2020: the go-go years for Clean Energy
But then came the aftermath of this huge rise - as interest rates went up sharply, clean energy came under pressure due to the reliance of large renewable energy infrastructure projects on cheap long-term debt financing.
2021-2024: Unwinding of the Clean Energy Bubble
Finally, this year we have seen a modest resurgence in energy transition and renewable energy as interest rates have fallen, reducing the cost of debt financing.
Since the beginning of this year, the iShares Clean Energy ETF has risen 21% in US dollars, breaking the long-term downtrend in place since 2021 and returning double the performance of global stocks over the first 6 months of this year.
Clean energy finally looks to have bottomed
While the performance of clean energy and energy transition indices has been less impressive in euros and pounds, they have nevertheless reached double digits so far this year.
This theme should benefit from two factors:
The continued reduction in financing cost as central banks cut benchmark interest rates; and
The renewed focus on energy infrastructure investment as energy security becomes paramount following the Ukraine conflict.
2. Health care: a defensive growth sector under pressure from Trump and Kennedy
Over the long term, the global health care sector has proved an excellent defensive growth performer. This sector benefits from the ageing population trend in developed economies and the onwards march of medical innovation.
US Health care (XLV, in blue) has been a great long-term outperformer
However, health care stocks are under pressure this year following the election of Donald Trump and his selection of Robert Kennedy Junior as Health Secretary. Trump has announced his desire…
