The U.S. presidential race created a whole new way to disagree: Biden stocks vs. Trump stocks. And ETFs now let people vote their politics with their portfolios and keep score. But should they?
A new ETF that owns roughly 50 left-leaning stocks in the S&P 500 plans to launch election week. The ETF, Democratic Political Contribution Fund (DEMZ), holds stocks where the companies and top executives donate 75% of political contributions to Democrats. The ETF is set to trade on Nov. 3.
And this new ETF squares off against the PointBridge GOP Stock Tracker (MAGA). Its trading symbol reflects the “Make America Great Again” campaign of President Donald Trump. MAGA filters S&P 500 stocks based on those companies’ and executives’ donations which are “highly supportive of Republican candidates” running for elected office. MAGA launched in 2017.
Meanwhile, two more ETFs with a political bent are launching, too. The American Conservative Values (ACVF) started trading Oct. 28 to be followed by American Conservative Values Small Cap (ACVS). These ETFs seek “to avoid ownership of companies which the Adviser determines disproportionately support liberal causes, charities, advocacy groups, campaigns, candidates, PACs and think tanks,” according to the regulatory filing.
Political ETFs highlight how some investors want to align political views with their portfolios, says Jason Britton, CEO of Reflection Asset Management, the investment manager of DEMZ. “Have you thought about whether or not you’re supporting your politics … with your investment dollars, meaning your retirement, your savings, your 401(k) or your traditional brokerage account?” he said.
So, which ones are winning? Biden stocks or Trump stocks?
Biden Stocks Get A Lift From S&P 500 Technology
And Biden stocks in the S&P 500 continue to outperform Trump stocks. The Democratic Political Contributions index returned 17.95% annualized over the past three years through Sept. 30, says S&P Dow Jones Indices. That blows away the 0.77% annualized three-year return of Point Bridge GOP in the same period, says Morningstar.
Looking at recent top 10 holdings shows why Biden stocks are outperforming. The top 10 holdings are up an average of 10% this year. That tops the 5.5% average gain this year of the top 10 holdings in PointBridge GOP.
All told, DEMZ puts 27% of its portfolio in technology stocks, versus just 2.9% of PointBridge GOP and 23% in the S&P 500.
What’s holding back the PointBridge GOP ETF? Nearly 13% of its portfolio in energy, seen as Trump stocks, while DEMZ holds none in the struggling sector. It also puts nearly 10% in utilities, double that of DEMZ. Two top holdings are American Electric Power (AEP) and Southern (SO), which are both down this year. PointBridge GOP is down roughly 10% this year, while the S&P 500 is up roughly 2%.
Politics and S&P 500 Portfolios May Not Mix
The limited track record of politically focused funds reminds investors of the risks mixing money and politics.
“I don’t think event investing is a great idea,” said Dave Nadig, chief investment officer of ETF Flows. “It implies that you … have some sort of secret edge that the entire market is missing just because of your analysis of a political system, event, or policy.”
If you think the next administration will be good for energy, just buy an energy ETF, he says. If you think the next president will help solar stocks, buy a renewable energy ETF. “I’m not suggesting politics doesn’t matter, I’m saying it’s largely inobvious,” Nadig said.
And that’s what investors are already doing. Thematic ETFs are drawing big inflows partially on political hunches, says Todd Rosenbluth, head of ETF & Mutual Fund Research. “This is … behind the demand for clean energy and solar ETFs,” he said. “We could also see infrastructure ETFs (gain) in demand as well.”
Political bent ETFs tend to charge more as well. The PointBridge GOP ETF charges 0.72% annually. And DEMZ plans to charge 0.45%. PointBridge GOP attracted just $8.4 million in assets.
The ETF world is harsh. If they don’t lure assets, they will vanish. “ETFs that have under $50 million in assets face great risk of closing and if Trump loses the MAGA ticker will mean less to the general public,” Rosenbluth says.
Biden Stocks Largely Outperform Trump Stocks
How top holdings in left and right leaning ETFs compare
|Democratic Political Contributions ETF||Point Bridge GOP Stock Tracker ETF|
|Company||Symbol||Stock YTD % Ch.||Sector||Company||Symbol||Stock YTD Ch. %||Sector|
|Alphabet||(GOOGL)||15.8%||Communication Services||General Electric||(GE)||-33.8%||Industrials|
|Colgate-Palmolive||(CL)||10.7%||Consumer Staples||NVR||(NVR)||3.5%||Consumer Discretionary|
|Apple||(AAPL)||56.2%||Information Technology||L Brands||(LB)||80.5%||Consumer Discretionary|
|International Business Machines||(IBM)||-19.6%||Information Technology||Pinnacle West Capital||(PNW)||-8.8%||Utilities|
|Agilent Technologies||(A)||19.4%||Health Care||WestRock||(WRK)||-13.7%||Materials|
|Progressive||(PGR)||25.7%||Financials||American Electric Power||(AEP)||-4.9%||Utilities|
|Adobe||(ADBE)||40.7%||Information Technology||Southern Company||(SO)||-8.4%||Utilities|
Sources: IBD, S&P Global Market Intelligence, Morningstar, Reflection Asset Management
Follow Matt Krantz on Twitter @mattkrantz
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