Should You Invest in Democratic or Republican ETFs? Interest in Political ETFs Rises Ahead of U.S. Midterm Elections [Weekend Money]

Strong Performance from ETFs Tracking Lawmakers' Purchases
Democratic ETFs Have High Exposure to AI Platform Companies
Republican ETFs Focus on AI Infrastructure, Power, and Semiconductors

With just over a month and a half remaining before the U.S. midterm elections, analysts are suggesting that stocks actually purchased by politicians could become beneficiary stocks.

Wooyeol Park, a researcher at Shinhan Securities, stated, "Among political theme exchange-traded funds (ETFs), baskets based on the actual trading activity of politicians have demonstrated strong performance," adding, "If investors are focusing on beneficiary stocks given the resolution of election-related uncertainties, it is time to pay more attention to the stocks that lawmakers are truly buying rather than campaign slogans."

Democratic Party basket investment products include the NANC ETF, which is based on public disclosures of trades made by Democratic lawmakers, and the DEMZ ETF, which consists of S&P 500 companies where donations from Democrats exceed 75%. As for Republican basket products, there are the GOP ETF, which reflects public trading disclosures by Republican lawmakers, and the MAGA ETF, which is based on Republican donation data.

Researcher Park analyzed, "Although various political theme ETF baskets have emerged in the U.S., baskets that track the actual trading activity of politicians outperform those based on party support."

Analyzing the constituent stocks, both the Republican and Democratic baskets show a high degree of exposure to AI. The Democratic basket is heavily weighted toward AI platforms, while the Republican basket has substantial exposure to AI infrastructure companies in semiconductors, networks, and power. The top five stocks purchased by Republican lawmakers include Comfort Systems, Intel, JPMorgan Chase, Bitcoin, and Arista Networks. For Democrats, the top picks include Nvidia, Microsoft, Google, Amazon, and Apple.

Although the stock market in the United States has generally performed well after midterm elections, analysts caution against broad generalizations. Since the 1990s, midterm elections have typically served as a positive catalyst for market indices. This has been attributed to the resolution of policy uncertainties and the announcement of stimulus policies ahead of the elections. However, Researcher Park explained, "Analyzing all elections held over the past 250 years since the country's founding does not reflect shifts in industrial structure, and it is more appropriate to assign greater weight to recent samples to apply modern sector classifications."

Typical political theme stocks are influenced by sectors aligned with the policies and pledges of each party. For Republicans, these themes include energy policy oriented toward deregulating oil and financial ETFs representing financial deregulation. Cryptocurrency has also been classified as a Republican theme, in line with U.S. President Donald Trump's "crypto capital" campaign pledge.

In contrast, "renewables" are considered the core theme for Democrats. While President Trump has shown skepticism regarding climate change, a majority of Democratic voters are in favor of renewable energy policies. Relevant sectors for Democrats include renewables, solar power, and electric grid ETFs. Researcher Park noted, "Although sentiment toward renewables has recently weakened due to practical considerations, companies in the electric grid sector continue to perform strongly amid soaring demand for AI data centers."

This content was produced with the assistance of AI translation services.