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4 Factors of Policy Investing

06.11.2018 | Ben Phillips, CFA

Washington DC in the SPring


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We group policy into four factors: Fiscal, Trade, Regulatory, and Monetary.


  • Fiscal is defined by the level of government spending and taxing. It’s driven by government budgets and appropriations, tax rates, and debt levels.


  • Trade relates to the regulations and agreements controlling imports and exports. It includes taxes, tariffs, and the resulting trade deficits and surpluses.


  • Regulatory is the use of regulations, laws, and other instruments to achieve the government's objectives. Regulations can impact banking and insurance, the environment, minimum wages, etc.


  • Monetary is the process by which the country’s monetary authority, the Federal Reserve, determines the size and growth rate of the money supply and interest rate levels.



In our view, only monetary policy is closely followed by investors. The remaining three policy groups are less scrutinized, with investors passively consuming most Washington, D.C. news. Instead, they rely on fundamental and technical analysis to identify policy catalysts at the individual company level. For these investors, policy is not a top-down, macro catalyst, but rather a series of one-time, market-moving headlines.


“Monetary Policy is the only factor

closely followed by investors.”



Along those lines, many investors tend to incorrectly equate policy with politics. We think this causes them to discount policy in the portfolio-management process and underestimate its potential impacts.

While both policy and politics originate in Washington, D.C., they are not equivalent. Politics represents government conflict and debate, while policy is the resulting legislation.



This is an excerpt from our White Paper: 

A Guide to Policy Investing



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Important Information

Active Weighting Advisors LLC ("AWA") is an SEC-registered investment adviser that manages ETFs under the brand name EventShares Funds. Mr. Phillips is the Chief Investment Officer of AWA. The views expressed are subject to change, and no forecasts can be guaranteed. The comments may not be relied upon as recommendations, investment advice or an indication of trading intent. AWA is not soliciting any action based on this document. In preparing this document, the author has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources. Investing involves risk, including the possible loss of principal and fluctuation of value. Mr. Phillips and AWA disclaim responsibility for updating information. In addition, Mr. Phillips and AWA disclaim responsibility for third-party content, including information accessed through hyperlinks. For more information about EventShares, contact us by calling 877.539.1510 or visit our website at www.EventShares.com.