Once upon a time, a stock was just a stock. Just a few decades ago, investors bought Exxon stock for its dividends, Microsoft stock for its growth, and Coca-Cola stock for its classic appeal.
Today, those choices may say as much about your politics as your palate. A new study by Stephan Siegel, Professor of Finance and Business Economics at the University of Washington’s Foster School of Business, and his co-authors reveals that America’s political polarization has crept into the equity market, reshaping portfolios along partisan lines.
red chips vs. blue chips
In the Political Divide and Partisan Portfolio Disagreement study, Siegel and his co-authors introduced a novel metric: Partisan Portfolio Disagreement (PPD), the share of portfolio value by which Democratic- and Republican-leaning investors differ.
Using county-level data on the political preferences and equity holdings of wealthy U.S. households from 2001 to 2019, they found that PPD more than doubled over the two-decade period. By 2019, roughly 20% of portfolios had diverged along party lines, whereas the portfolios of Democratic and Republican investors had exhibited minimal differences in the early 2000s.
The divergence is not confined to a few niche stocks. The number of “partisan stocks”—those disproportionately held by one political camp—has surged, especially among large-cap firms. Microsoft and Amazon tilt blue; ExxonMobil and Johnson & Johnson lean red. The share of market capitalization tied to partisan stocks has ballooned from 10% to nearly 30%.
the sinclair effect
Siegel emphasizes that correlation, of course, is not causation. Perhaps investors in Republican counties simply prefer oil because they live in Texas, not because they vote red. To tackle this, Siegel and his co-authors exploited a natural experiment: the staggered entry of Sinclair Broadcast Group, a conservative television network, into local media markets.
Sinclair’s arrival nudged counties rightward in voting behavior. It also widened the gap in their stock portfolios. When political distance between two counties grew after Sinclair’s entry, so did their portfolio distance. This provides rare causal evidence that politics, not just geography or economics, drives investment choices.
Stephan Siegel, Michael G. Foster Endowed Professor of Finance and Business Economics at the UW Foster School of Business
why the split?
Two forces are at play.
First, ideological polarization: While Democrats tend to place greater emphasis on a firm’s environmental and labor practices, Republicans are less likely to view those factors as decisive.
Second, affective polarization: dislike of the other party spills into finance. Republican-leaning counties, for instance, have reduced holdings in firms led by Democratic-leaning CEOs.
Add the rise of ESG investing and personalized indexing, and aligning portfolios with politics has never been easier.
the broader consequences
The implications go beyond Wall Street. Corporate executives can no longer assume that shareholders are a monolithic bloc focused solely on profits. They must navigate a landscape where investor bases are politically segmented—and where decisions on climate policy, labor practices, or even CEO donations can alienate one camp while pleasing another.
In addition, the feedback loop may not end at the trading desk. If your portfolio is heavily invested in green-energy firms, you may favor policies that subsidize renewable energy. If it leans on oil, you might oppose them. In other words, portfolio composition could begin to shape political preferences, reinforcing polarization in a self-perpetuating cycle.
As Siegel warns, “Political divisions are now creating new divisions—this time over who owns what.”
Learn more about the study here.
Pan, Yihui and Pikulina, Elena and Siegel, Stephan and Wang, Tracy Yue, Political Divide and Partisan Portfolio Disagreement (March 31, 2025).