Defiance Files Trump-Themed 'MAGA Seven' ETF

A new filing from Defiance ETFs will test the limits of how politics influences financial markets to create viable investment opportunities.

The Defiance MAGA Seven ETF (MAGT), filed for approval this week with the Securities and Exchange Commission, promises a concentrated portfolio of just seven stocks “that appear positioned to benefit from the economic, regulatory and policy environment shaped by the Trump administration and its potential future impact.” The name is a play on the so-called Magnificent 7 tech stocks that have propelled the tech-heavy index over the past few years.

The filing for the actively managed ETF does not list any companies that might be included in the portfolio but states that the positions will be equally weighted. It adds that companies may be pulled out and others rotated in "due to its increased alignment with Trump-era or future policies."

“This is simply the latest in what I anticipate will be a parade of politically tinged ETFs,” said Nate Geraci, founder of The ETF Store in Overland Park, Kansas.

“Regardless of whether you agree or disagree with the Trump administration's policies, it's clear that they are moving extraordinarily fast to implement their agenda, which will meaningfully impact certain industries and companies,” he added. “That said, predicting the timing and magnitude of such impacts is always challenging, which is why I recommend investors avoid mixing politics and portfolios.”

Trump-Focused ETF

Such a concentrated portfolio presents the potential for big wins and big losses, regardless of it being pegged to the shifting winds of politics, said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence. “Depending on the stocks, you could really have a nice run, but the concentration could also help it underperform."

From a concentration perspective, MAGT is reminiscent of the Roundhill Magnificent Seven ETF (MAGS), an actively managed portfolio of between five and 10 leading technology companies.

In terms of a play on politics, MAGT is in the camp of the Point Bridge America First ETF (MAGA), which tracks an index of large-cap companies whose employees and politics are highly supportive of Republican candidates.

As Balchunas pointed out, mixing politics and investing can be tricky.

MAGA, for example, which was introduced during Donald Trump’s first term in 2017, performed better during Joe Biden’s term as president than it did during Trump’s first term.

Unique from MAGA, MAGT is specifically targeting companies that will benefit from Trump’s policies.

Unrelated to the MAGT filing, a Morningstar report this week highlighted seven companies that have been strong performers since Trump was reelected in November.

Among the examples of stocks that have all gained at least 50% since the election, network technology company Ubiquiti Inc. (UI) leads the way with a 224% gain, followed by app-monetization company AppLovin Corp. (APP) with a gain of 107%.

Balchunas said he would expect to see names like Tesla Inc. (TSLA), Coinbase Global Inc. (COIN), Robinhood Markets Inc. (HOOD) and Amazon.com Inc. (AMZN) among the MAGT holdings.

For what it’s worth, Tesla, Coinbase and Robinhood are on the Morningstar list, each gaining between 52% and 70% since the election.

Balchunas said the success of MAGT will ultimately come down to performance.

“I don’t think it gets all these MAGA people saying they have to buy it,” he said. “It will have to perform first.”

That performance, good or bad, will dictate the narrative for the strategy, according to Balchunas.

“If it starts to outperform, the narrative will be that Trump forced it, and the narrative will be logical,” he said. “If it tanks, the narrative will be why would you ever do that; politics doesn’t have anything to do with the markets.”