Financial markets, particularly those in the U.S., are often affected by politics. Exchange-traded funds (ETFs) have made it easier for investors to leverage political trades, but with equities, this is often done at the sector level – and sometimes investors get it wrong.

For example, there is the notion that Democrats are good for alternative energy stocks and bad for the traditional energy sector. However, during President Obama's eight years in office, the Guggenheim Solar ETF (TAN) faltered while the Energy Select Sector SPDR (XLE) surged. Another sector-level political assumption is that the financial services sector prefers Republicans, but the Financial Select Sector SPDR (XLF) is struggling this year with Donald Trump in the White House and Republicans controlling both houses of Congress. (See also: Political Ideologies and Stocks.)

Some new ETFs, assuming they come to market, could make trading politics a bit easier for investors. Event Shares has filed plans with the Securities and Exchange Commission (SEC) for a Republican Policies Fund, a Democratic Policies Fund, a U.S. Tax Reform Fund and a European Union Breakup Fund. The proposed funds will be actively managed and advised by Active Weighting Advisors LLC, which judging by the SEC filing appears to be the parent company of Event Shares.

"In respect of government action reflecting Republican Policies, the Fund initiates long positions in securities that will be favorably impacted by such policies and short positions in securities that will be unfavorably impacted by such policies. The Fund will be constructed and rotated in accordance with the current views of, and changes in, Republican Policies. Government action that is not aligned with Republican Policies may negatively impact the Fund’s portfolio," according to the filing. Likewise, the Democratic Policies Fund will take long positions in securities that can potentially benefit from Democratic control in Washington and short securities that could be adversely affected by such a scenario. (See also: How Governments Influence Markets.)

In terms of the other potential politically inspired ETFs, the proposed tax reform fund will look to invest "in securities expected by management to be affected by proposed changes in U.S. tax policy and regulations that change the way taxable income is calculated ('Tax Reform Themes'), regardless of whether the change increases or decreases the tax burden on individuals or companies," according to the SEC filing. (See also: Investors May Have to Settle for 'Tax Reform Lite'.) The European Union Breakup Fund would hold securities that would benefit from further departures or an all-out dissolution of the European Union (EU) and short assets that would be negatively affected by related events. (See also: What Could Happen if the Eurozone Breaks Up?)

The filing does not include expense ratios or tickers for the proposed ETFs, indicating that the products are not close to coming to market.

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