I have some bad news for everyone. It’s Election Season. That time when you are bombarded with ads of smiling men and women telling you how wonderful they are and how awful the other side will be if you choose them. What’s worse is that we are getting double hit by it because it’s also the start of a year-long election season in the United States. I have prepared my own plan to survive, and it involves the judicious use of the “mute” function on the TV and social media. I can’t stick my head in the sand the whole time, but I can limit the cacophony of noise that will induce tinnitus for the next month.

 

If you haven’t yet figured out, I am not a fan of Election Season. This doesn’t mean I am not interested in politics or that I am not paying attention. I do pay attention and you should too. I just prefer to pay attention to what politicians DO and ignore most of what they SAY. It’s harder than you think, but it can be done if you ignore anything that expresses an opinion and just read the facts.  The other trick I use is to try to figure out how specific policies would impact my community. Everything is sold as appealing directly to you, the individual or the family, but it’s how they impact the other people around you that matters. 

 

There is a reason I have learned to think like that and it comes from a very specific example. The 2016 US Presidential Election. When Donald Trump won the election there was this weird moment during the night where stock markets around the world dropped on the surprising victory. It seemed like a collective shock response to the result had everyone running for the exits. That was a knee-jerk reaction as highlighted in this article. The next day? Everyone woke up and started thinking about how that result would impact the community. Taxes would go lower. Regulations would be loosened. The US market responded with excitement and actually rose 1% the day after the election. It didn’t matter whether we agreed with those ideas, it mattered that they were now more likely to happen.

 

This is probably making you think that investing your money based on politics is a great idea. I am here to show you it probably isn’t. In fact, it likely is a recipe for underperformance. Let’s take a look at a specific example - the Point Bridge GOP Stock tracker ETF, or as it is better known, the MAGA ETF (MAGA is its symbol after all).

 

What is the MAGA ETF? It has a rather simple and easy to understand investment policy. From the ETF.com website: "MAGA tracks an index of US large-cap companies whose employees and political action committees are highly supportive of Republican candidates."

 

Republican President. Republican controlled Senate and Congress. This HAS to be a winner, right? Companies and employees putting their money behind the party in power will surely do well. Yet, here is the MAGA ETF's performance vs the MSCI US Large Cap Index since MAGA started trading in 2017.

(Source:   https://www.etf.com/MAGA#overview)

 

MAGA (blue line) hasn’t been a bad investment. In two years it is up about 13%. The broad, apolitical MSCI US Large-cap Index (grey line) is up more in the same time, though. In a time with a GOP President, Senate, and Congress, and it still doesn’t beat a broadly diversified index? Maybe that is telling us something.

 

I didn’t cherry pick this example. MAGA has actually been the best performer in this weird space. There have been a few other ETFs launched targeted towards an investor’s political leanings. An Asset Manager named EventShares launched a Democrat Policy ETF as well as a Republican policy ETF. Both lasted about a year before closing due to lack of interest.

 

Now that it is Election Season here in North America, I encourage you to pay attention to the facts and try to ignore the fanfare. Understand how the policy plans impact you and your community, but most of all, never make investment decisions based on politics.  You and your portfolio will be better off in the long run.

 

P.S. Get out and vote. Young, old. Newcomer or born and raised. I want you to vote. Check out Elections Canada’s great website for all the info you need to ensure you are registered to vote and know where to go to cast your ballot.