By Shubham Saharan
As Democrats and Republicans battled for seats in Congress on Tuesday, the exchange-traded funds that correspond to both political parties’ viewpoints were also racing for returns.
Republicans are projected to retake control of the House of Representatives, according to recent polls, while the U.S. Senate, narrowly controlled by Democrats, is still up for grabs. And while voters may bemoan potential political gridlock, that doesn’t mean market performance is set for a downturn.
“It’s no exaggeration to say that midterm elections are one of the best historic buy signals for equities we have,” Jim Reid, global head of credit strategy at Deutsche Bank, said in a note to clients on Tuesday.
The left-leaning Democratic Large Cap Core ETF (DEMZ) soared as much as 4.7% during the trading day Tuesday, according to ETF.com data, while the right-leaning Point Bridge America First ETF (MAGA) inched up 1.1%. The S&P 500 [1] rose 0.6% during midday trading.
DEMZ, which has $20.4 million in assets under management, is comparable to the SPDR S&P 500 ETF Trust (SPY), but only includes companies that have made over 75% of their political contributions to democratic causes and candidates. Meanwhile, MAGA, which has $15 million in AUM, mainly invests in companies whose employees and political action committees support Republican candidates and groups.
Source: Bloomberg
Volumes spiked for both funds ahead of voting day, as MAGA drew in $15,700 on Monday, more than sixfold the $2,500 pulled the day before, Yahoo Finance data shows.
“Historically, during midterm elections, the broader U.S. equity market has, on average, reacted positively to the reigning political party's ability to retain its position in both chambers of Congress,” Abhishek Gupta, an executive director at MSCI Research, wrote in a statement to ETF.com. “Interestingly, a flip in control hasn't meant a drawdown relative to the price performance observed prior to the election.”
“However, equity markets continue to face several economic headwinds that may persist beyond the elections and keep volatility at elevated levels,” he added.
DEMZ standard performance and disclosure: https://demz.fund/performance
Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.
Source: ETF.com
[1] S&P 500® Index: (registered trademark of The McGraw-Hill Companies, Inc.) is an unmanaged index of 500 common stocks primarily traded on the New York Stock Exchange, weighted by market capitalization. Index performance includes the reinvestment of dividends and capital gains.
Opinions in the article are of the author noted. It should not be regarded as investment advice or recommendation of specific securities. The performance quoted represents past performance and does not guarantee future results.
Carefully consider the fund’s investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the fund’s summary or full prospectus, which may be obtained by calling (888)-750-DEMZ (3369). Please read the prospectus carefully before investing.
Investing involves risk, including the possible loss of principal. There is no guarantee or assurance that the methodology used to create the Index will result in the Fund achieving positive investment returns or outperforming other investment products.
The fund is subject to the risks associated with the information technology sector. Such issuers may underperform the market as a whole due to legislative or regulatory changes, adverse market conditions and/or increased competition affecting the Information Technology Sector.
DEMZ is distributed by SEI Investments Distribution Co, which is not affiliated with Reflection Asset Management, LLC.
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