You Can't Escape Politics. Your Investing Decisions Can.
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Many stocks that got a “Trump bump” up to and after the election have done badly since Inauguration Day—probably because investors who put their money where their vote was drove these companies’ stock prices to unsustainable heights. Between late last September and the end of October, Trump Media & Technology Group’s stock more than quadrupled. So far this year, it’s lost 34%. Shares of CoreCivic, which operates private prisons, nearly doubled right after the 2024 election. So far this year, the stock is down almost 12%.
And once your political scruples rule out any kind of stock, you own only a segment of the market—which is likely to behave quite differently from the market as a whole, for better or (more likely) for worse. Technology is the biggest industry sector, constituting more than 30% of the S&P 500’s market value—and contributing much of the market’s gain in recent years. Tech companies also have tended—until recently—to be “woke,” for example by instituting policies to encourage gender and racial diversity. Shunning the woke can mean underweighting technology stocks and overweighting industrial, financial and energy companies.
Political filters can have quirky consequences. The God Bless America ETF (ticker symbol: YALL) has lagged the S&P 500 by 0.7 percentage point since the election. While President Biden was in office, it outperformed significantly. YALL won’t invest in companies that take “politically left” stands on social and political issues. But that’s a subjective judgment Consider Amazon.com or Facebook parent Meta Platforms. Before the 2024 election, they acted woke. Ever since, they’ve been scrambling in the opposite direction. They aren’t yet eligible for inclusion in the fund, says Adam Curran, YALL’s portfolio manager. “I’m a grudgeholder,” he tells me.
The Point Bridge America First ETF (ticker: MAGA) owns companies whose employees and political-action committees donate significantly to Republican candidates and have the majority of their assets within the U.S. The fund holds about 150 stocks from the S&P 500, weighting them equally. Since inception in late 2017, MAGA has trailed the S&P 500 by an average of 3 percentage points annually. Why would a company’s political contributions determine its profitability? MAGA’s portfolio manager, Hal Lambert, thinks firms that donate to Republicans “have more of a free-market viewpoint and are focused more on their shareholders.”
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The performance of ESG funds has been mediocre. An analysis published in 2023 of dozens of research studies found that the returns of ESG funds have “on average been indistinguishable from conventional investments.”
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