Overview: Changes Made To The Portfolio

Every quarter, Strategas rebalances the U.S. Large-Cap Policy Opportunities Portfolio (POP) to reflect the latest quarterly lobbying allocations made by S&P 500 companies. On August 15, 2024, the portfolio was rebalanced and reconstituted to reflect second quarter 2024 lobbying data.

Second quarter rebalances are historically the second largest of the four yearly rebalances for the strategy. On average, since POP’s inception in 2016, first quarter rebalances average 7.1 names coming in and out of the strategy. This quarter we are adding 8 names while removing 9 due to Illumina’s divestiture of Grail in June 2024.

While this quarter’s rebalance is coming in slightly higher than average, we continue to believe companies may be waiting to see the outcome of the presidential election. This is evidenced by slowing S&P 500 lobbying spend. We do not expect to see much in terms of major legislation ahead of November and the ability for Congress to advance legislation in the lame duck period will depend on November’s results

The last two months have been unprecedented in terms of elections. Former President Trump was convicted on felony charges, President Biden had a disastrous debate performance, Trump survived an assassination attempt, and Biden dropped out of the race. As a result, we have seen the election go from a toss-up, to looking increasingly like a Republican sweep, back to a toss-up with momentum once again behind Democrats, led by new candidate Vice President Harris.

We expect the coming months to be volatile. The race has narrowed and early voting begins in some states just after mid-September. This makes the outcome of the election increasingly difficult to predict.

Still, while the nature of the race has changed, the investment implications have not. We maintain that there are six major areas where we see some of the biggest bifurcations in policy direction and biggest macro-economic impact: 1) Trade; 2) Geopolitics; 3) Immigration; 4) Regulatory Environment; 5) Fiscal Policy; and 6) Tax Policy.

Given these major policy differences, we expect companies will continue – and likely increase – engagement after the election and the policy priorities are clear.

Companies are used to volatility in Washington. They historically had to navigate changes in partisan control following 8 of the past 9 presidential and midterm elections. A change in either House, White House, or Senate control this election would create changes in 9 of the past 10 elections – tying the period of 1878-1896 for the most election volatility.

This rebalance we are adding to our positions in Health Care and Communications and reducing exposure in Energy, Technology, and Utilities

As a result, Health Care will have the strategy’s largest target weight ex-cash at 28 percent and is also now the strategy’s largest overweight position relative to the S&P 500, based off current weights. This is the most overweight the strategy has been Health Care since inception.

The strategy maintains a 24 percent target weight in Industrials – its second largest weight and overweight position relative to the S&P 500. The strategy is also overweight Materials with an 8 percent target weight.

While Technology is the strategy’s third largest target weight outright at 14 percent, the portfolio is now nearly 17 percent underweight the S&P 500. This is the largest underweight position the strategy has held in Technology since inception.

Recent market volatility, particularly hitting Technology, in July and August has been a relative benefit to the strategy’s performance given POP’s underweight positioning in Tech and overweight positioning to Health Care – a defensive sector.

Definitions:

The S&P 500^® Index (the Index) is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. The Index includes 500 leading companies and covers approximately 80% of available market capitalization.

This communication was prepared by Strategas (“we,” “us,” or “our”), a brand that offers investment advisory services through Strategas Asset Management, LLC, an SEC Registered Investment Adviser, and provides research to institutional investors through Strategas Securities, LLC, a broker-dealer and FINRA member firm and an SEC Registered Investment Adviser.  This communication represents our views as of 08/15/2024, which are subject to change, and presented for illustrative purposes only. The information contained herein has been obtained from sources we believe to be reliable, but no guarantee of accuracy can be made. This communication is provided for informational purposes only and should not be construed as an offer, recommendation, nor solicitation to buy or sell any specific security, strategy, or investment product.  This communication does not constitute, nor should it be regarded as, investment research or a research report or securities recommendation and it does not provide information reasonably sufficient upon which to base an investment decision. This is not a complete analysis of every material fact regarding any company, industry, or security. Additional analysis would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any particular client and is not presented as suitable to any other particular client. Past performance does not guarantee future results. All investments carry some level of risk, including loss of principal.

Strategas Asset Management, LLC and Strategas Securities, LLC are affiliated with Robert W. Baird & Co. Incorporated ("Baird"), a broker-dealer and FINRA member firm, and an SEC Registered Investment Adviser, although the firms conduct separate and distinct businesses.