Can Political ETFs Find Common Ground Ahead of November?
Several exchange-traded funds that were created to track political themes, are gaining interest ahead of the presidential election.
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Financial advisors are about to face the inevitable. No, not the results of the election itself, but client reactions to it.
It’s natural for investors to want to talk about an important political event, and how it impacts their financial situation. Advisors can provide value by helping navigate difficult conversations about policies and the economy.
There are also a handful of exchange-traded funds that could interest politically-driven investors. Many of them track stocks considered to be aligned in one way or another with either of the major US political parties, and could come in handy (even just as icebreakers) when chatting geopolitics with clients.
Hot-Button ETFs
There are a handful of political ETFs that would jump out, and they include an offsetting pair from issuer Unusual Whales/Subversive Capital. The Democratic Trading ETF (NANC) and Republican Trading ETF (KRUZ) — named for Rep. Nancy Pelosi and Sen. Ted Cruz — are designed to give investors exposure to the same publicly traded companies that sitting members of Congress (and their families) have reported to be invested in.
Pelosi, along with her husband Paul, is known for making winning stock picks, and Cruz’s investments are some of the most-watched on Capitol Hill. Interestingly enough, they actually have many common holdings, including Nvidia and Microsoft. Apparently, those Magnificent Seven members appeal to both sides of the aisle. There are also two other prominent funds:
- The Democratic Large Cap Core ETF (DEMZ) is one of the first investment products that “strives to replicate the S&P 500, without the GOP.” The fund tracks only companies on the S&P 500 that have made over 75% of their political contributions to Democratic causes and candidates.
- The American Conservative Values (ACVF) ETF is an actively managed diversified large-cap core ETF that avoids companies “hostile” to conservative views while investing in firms that meet its conservative criteria, according to its website. In other words: This is the politically-tinged fund with exposure to Exxon.
Surprise, surprise: Both funds hold significant names in the Mag 7. If these ETFs can find common stocks to invest in, can’t we all?
Filibuster, Of Sorts? Just before year-end tax and financial planning begins, client sentiment about the election could take center stage. Even though advisors would probably rather debate the virtues of a 60/40 portfolio, don’t sidestep important conversations with clients — the markets often don’t react as we expect, which makes post-election client communication even more important.
Keep in mind that these concerns are usually fleeting, and will likely be around for as long as the tenure of former President William Henry Harrison. (His term lasted only 32 days, after he insisted on giving his two-hour inaugural address on a freezing day without a jacket.)
That’s advice that shouldn’t be recommended by anyone.
