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 November 15, 2024, the portfolio was rebalanced and reconstituted to reflect third quarter 2024 lobbying data.

Third quarter rebalances historically average 5.1 constituent changes in and out of the strategy since POP’s inception in 2016. This quarter we are adding 6 names and removing six names. Of the six names that are being added, this is the first time for inclusion in the strategy for four of the names: PLTR, CRWD, TRMB, and DXCM.

The November 5, 2024 election was one of huge investment consequences. Republicans took control of the White House and Senate, while maintaining control of the House, to give them unified control over Washington.

This marks the ninth election of the last ten midterm and presidential elections where there was a change in party in power. According to our analysis, this ties the current period with 1878-1896 for the most election volatility in United States history.

We believe companies may have slowed their lobbying spend in recent quarters as they awaited the outcome of the presidential election. Now that the election results are known and companies are seeing the personnel announcements from the Trump transition team, as well as hearing the governing priorities from President-elect Trump and Republican leadership, we believe there could be a reversal in the trend of slowing spend. Notably, looking at data back to 1998, we historically have seen the strongest growth in lobbying spend following elections where Republicans sweep government control.

The issues that President-elect Trump and Republicans ran on during the 2024 election include trade, immigration/border, de-regulation, extension of tax cuts, reduced foreign intervention, and fiscal discipline – to name a few.

Whether the future administration and Congress implement these policy priorities, the scale at which they do it, and how it is done, will have huge investment implications and create winners and losers.

Already, as of close November 15, 2024, we are seeing the market react to expected policies of the next administration. Companies levered to immigration enforcement, deregulation (bitcoin miners, Financials), onshoring beneficiaries, and those more insulated from tariffs due to high US revenue exposure are outperforming since the election. On the other side, we have seen underperformance in names with high percentages of foreign exposure, reliance on Mexico manufacturing, vaccine makers, and Defense companies all underperforming.

Trade policy is a macro issue where we are already seeing an influx of post-election activity as investors and corporations try to prepare and gain clarity on the Trump’s tariff threats targeting China and on all imports into the United States. Our analysis of 2019 Q3 lobbying activity, the last quarter prior to President Trump announcing a trade deal with China, showed 20.2 percent of then-S&P 500 constituents were lobbying on China-related issues. Our year-end 2023 data shows that 15.6 percent of year-end constituents were lobbying on China. It would not surprise us to see that number rise next year.

This rebalance we are adding to our positions in Technology and Communications Services while reducing exposure to Energy, Discretionary, Health Care, and Real Estate.

While Health Care’s weight has been reduced to 26 percent (excluding cash), it remains the strategy’s largest outright weight. Industrials is the strategy’s second highest weight at 24 percent.  Both the Health Care and Industrials weights are roughly 15 percent higher than those of the S&P 500.

With the addition of three Technology names, the sector’s weight has increased to 20 percent – the highest the strategy has held since the 2021 Q4 rebalance in March 2022.

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 11/18/2024, 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.