“In the past, the average investment advisor would stay out of the politics realm because of the risk of alienating customers or clients,” he says.
A fund based on a percentage of PAC donations could give rise to a Democratic party counterpart, Weisbruch says. Such funds could then be used in unconventional ways that the creators likely didn’t intend. Say if you don’t like a fund made up of Republican donors that “would be a really good way to hone in on short exposure,” Weisbruch says.
Barry Ritholtz, chairman and chief investment officer at Ritholtz Wealth Management, who has researched and written about the intersection of politics and investing, vetoes politics-focused investing.
He noted the stock market still rose when Democrats hated then-President George W. Bush’s tax cuts, and the markets rallied under President Barack Obama, whom Republicans said would be bad for business.
Wall Street doesn’t speak with one voice, he says, though he adds that it is thought of as more right-of-center politically, being anti-tax and anti-regulation in general.
Although the MAGA fund uses a rules-based index, Ritholtz says the rationale that companies that give money to one political party or another will somehow translate into better performance is flawed. “Why would that lead to better performance?” he asks.
He says he would be interested in academic research that looks at what elements of corporate lobbying and political donations might be correlated with improved market performance.
“That’s an argument that says we’ve identified a specific corporate behavior that results in long-term positive market return. Well, fantastic. That’s something everybody should be happy to put their money in,” he says.