The "bipartisan divide" in the U.S. stock market has never been this significant

When political positions begin to dominate stock accounts, Wall Street's mantra of "don't bring politics into your portfolio" is being overturned.

According to a June 15 report by The Wall Street Journal, since the spring of 2025, American investors have experienced unprecedented investment divergence due to opposing political stances. Gallup polling data shows that Democrats expecting the stock market to decline in the next six months outnumber Republicans by 59 percentage points, while Republicans who are bullish on the stock market outnumber Democrats by 47 percentage points.

The data reveals a shocking reality: the 47-point partisan bullish gap in the stock market is the largest since 2001. In contrast, during the presidency of former U.S. President George W. Bush in 2001, the gap between Republicans and Democrats was only 13 percentage points.

Political Stance Drives Investment Choices

"If I know how my clients vote, I can predict how they feel about the stock market," said David Sadkin, a partner at Bel Air Investment Advisors, which manages about $12 billion in assets.

According to the University of Michigan's monthly consumer survey, the phenomenon of political stance influencing economic perception has long existed but has sharply worsened since Donald Trump's election in 2016.

After Trump's tariff policies triggered market turmoil, David Sadkin received a large number of politically charged consultation calls. A couple of clients opposed to Trump requested to "move all assets out of the U.S.," fearing a complete collapse of stocks, bonds, and the dollar.

Research by Elena Pikulina and others found that by analyzing the securities filings of independent investment advisors in 309 U.S. counties, wealthy investors leaning Democratic and Republican indeed choose different stocks. This portfolio divergence began during the Obama administration in 2013 and continued to expand during Trump's first term.

Astute Wall Street has begun to profit from investors' partisan preferences. Funds such as the American Conservative Values ETF and the Point Bridge America First ETF, coded as "MAGA," have attracted tens of millions of dollars in assets.

However, according to data from The Wall Street Journal, the American Conservative Values ETF has roughly tracked the performance of the S&P 500 over the past three years, while the MAGA fund has lagged the S&P 500 by more than 20 percentage points.

The Cost of Political Trading

Trading driven by political sentiment can come at a steep price. For instance, investors who chose to sell during the tariff crisis in April missed the subsequent rebound of the S&P 500, which recovered and approached historical highs.

According to Bespoke Investment Group, if investors had invested $1,000 solely during Republican presidential terms since 1953, the current value would be about $29,000; investing only during Democratic terms would exceed $60,000; but simply holding long-term could appreciate to $1.9 million New York investor Eknath Belbase has reduced his U.S. stock holdings to 50%, stating, "Policies are like improvisation." Meanwhile, 81-year-old Trump supporter Ronald Gallagher acknowledges that the Republican Party is better for the stock market, but his portfolio has achieved its best two consecutive years with over 20% returns in 25 years during former President Biden's term. He said, "The returns are okay, but it has nothing to do with Biden."

As the old Wall Street adage warns, when political passion dominates investment rationality, it is often the investors' own wallets that get hurt