CNN | 12/17/2018 | Español | Listen

It pays to be bipartisan when picking stocks

Updated 7:55 AM ET, Thu October 11, 2018

(CNN Business) - The proverbial "they" say that you shouldn't mix politics with business. It looks like "they" may be right.

A Republican-themed exchange-traded fund, the Point Bridge GOP Stock Tracker, with the fitting ticker symbol of MAGA, is down about 1% so far in 2018 and only up 4.6% over the past year. That lags the broader market.

The fund mostly has equally weighted bets on companies in industries that should benefit from a Republican political agenda, namely big oil companies like Anadarko Petroleum (APC) and Hess (HES), financial firms Citigroup (C) and JPMorgan Chase (JPM) and industrial giants Boeing (BA) and Caterpillar (CAT).

The Dow and S&P 500 are up about 4% this year while the Nasdaq has gained 7.5%. All three indexes have sported double digit gains for the past 12 months too.

Another politically themed ETF, the EventShares U.S. Policy Alpha ETF (PLCY), is up more than 2% this year and nearly 10% during the past 12 months. This fund picks stocks based on broader legislative initiatives.

It owns a fair amount of healthcare stocks and consumer companies, such as insurer Molina (MOH), hospital operator HCA (HCA) and retailers Costco (COST) and Kroger (KR). The fund also owns a bunch of defense, energy and bank stocks.

The EventShares and Point Bridge ETF performance proves that partisan politics and the markets do not mix well.

Earlier this year, EventShares shut down its Republican Polices and Democratic Policies funds and combined them with a tax reform ETF to create what is now the U.S. Policy Alpha ETF.

Ben Phillips, chief investment officer at EventShares, said in April that the two party-themed ETFs "were never intended as vehicles to express a political point of view, though they were viewed by some investors and advisors in that light."

It's no surprise the US Policy Alpha ETF, which doesn't bill itself as being tied to a particular political party, has done a bit better than the MAGA ETF.

So it may be the case that investing strategies tied to what the government is doing writ large makes more sense than catering to the interests of just Republicans or Democrats.


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