Jerry Hendricks
Portfolio Manager
Strategas Global Policy Opportunities ETF Quick Quarterly Rebalance highlights – U.S. Large-Cap Only
05/20/2024
After two straight years of companies increasing their lobbying spend, we saw a slight pullback of S&P 500 1Q lobbying spend compared to 1Q 2023. Moreover, more companies in the S&P 500 cut back their lobbying spend in 1Q than increased their spending. Our sense is that companies are in a wait-and-see approach ahead of the election.
Source: Senate Office of Public Records and Strategas Securities, as of May 15, 2024
Our analysis has found that companies which score high within our lobbying intensity model tend to see a benefit to their future earnings. We therefore believe investors can find value in watching the policy issues that companies lobby Congress and the White House on. Companies lobby policymakers with the intention of receiving a return on their investment, either through higher earnings from their desired policy changes or stopping a potential negative event.
Every quarter, Strategas rebalances the Strategas Global Policy Opportunities ETF (ticker: SAGP) to reflect the latest quarterly lobbying allocations made by companies in the Fund’s universe. Analyzing the available data for US large cap stocks first, we made five changes to the portfolio.
A deeper dive into the lobbying issues shows companies were still successful in getting several major lobbying accomplishments passed to date in 2024. With the government avoiding sequestration spending cuts and a foreign aid package for Ukraine, Israel, and Taiwan passing into law, defense companies were a major beneficiary of these policy changes.
While there were prominent adjustments made by corporations to date in 2024, there were no significant changes to our top five themes within the portfolio. We have, however, continued to see notable increases in those companies within the S&P 500 lobbying on artificial intelligence.
Current Themes:
-Healthcare Innovation
-Defense Spending
-Tax Policy
-Supply Chains & Manufacturing
-Privacy & Cyber Governance
Looking ahead, companies face an election which is a referendum on the speed at which de-globalization will take place. The potential for tariffs will impact companies’ addressable market share. At the same time, we expect 2025 to be the biggest year for tax policy since 1913 with more than $4 trillion of expiring tax provisions on the table and the possibility of corporate tax increases. Organizations should continue to adjust their lobbying spending accordingly providing an opportunity for an earnings benefit for those within the top of our lobbying intensity model as recognized by the stocks held within SAGP.
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Past performance is not indicative of future results.
This communication was prepared by Strategas Asset Management, LLC ("we" or "us" or “our”). This communication represents our views as of 05/15/2024, which are subject to change. 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 is an SEC Registered Investment Adviser affiliated with Strategas Securities, LLC, a broker-dealer and FINRA member firm, and an SEC Registered Investment Adviser. Both 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.
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Holdings are subject to change. Current and future holdings are subject to risk.
Carefully consider each of the Funds' investment objectives, risk, and charges and expenses. This and other information can be found in the Funds' summary or full prospectus which can be obtained by calling (855) 273-7227 or by visiting strategasetfs.com. Please read the prospectus, carefully before investing.
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Shares of any ETF are generally bought and sold at market price (not NAV) and are not individually redeemed from the fund. Brokerage commissions will reduce returns.
An investment in the Fund involves risk, including possible loss of principal.
In addition to the normal risks associated with investing, the Strategas Global Policy Opportunities ETF (SAGP) is subject to lobbying focused investment risk. The adviser's investment process utilizes lobbying intensity as the primary input when selecting investments for the Fund's portfolio and does not consider an investment's traditional financial metrics. The Fund may underperform other funds that select investments utilizing more traditional investment metrics. The Fund may also focus its investments in a particular country or geographic region outside the U.S. and may be more susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within that country or geographic regions well as risks of increased volatility and lower trading volume.
In addition to the normal risks associated with investing, the Strategas Macro Thematic Opportunities ETF (SAMT) is subject to macro-thematic trend investing strategy risk. Therefore, the value of the Fund may decline if, among other reasons, macro-thematic trends believed to be beneficial to the Fund do not develop as anticipated or maintain over time, or the securities selected for inclusion in the Fund's portfolio do not perform as anticipated.
In addition to the normal risks associated with investing, the Strategas Macro Momentum ETF (SAMM) may invest in smaller companies, heavily in specific sectors, and also invest in gold, all of which can exhibit high volatility. Securities may be difficult or impossible to sell at the time and the price desired. Investments with exposure to international markets may experience capital loss from unfavorable fluctuation in currency values, differences in generally accepted accounting principles, or from social, economic or political instability in other nations. REITs are subject to changes in economic conditions, interest rates, and credit risk. MLPs involve risks related to limited control and limited rights to vote on matters affecting the MLP. MLP common units and other equity securities can be affected by economic and other factors affecting the stock market in general, expectations of interest rates, investor sentiment towards MLPs or the energy sector, changes in a particular issuer's financial condition, or unfavorable or unanticipated poor performance of a particular issuer. MLP investments in the energy industry entail significant risk and volatility.
The Funds may be more heavily invested in particular sectors and may be especially sensitive to factors and economic risks that specifically affect those sectors.
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