Companies that actively engage in lobbying tend to outperform in both high and low volatility environments, according to a recent note from analysts at Strategas.
The research firm highlights that companies with the highest lobbying intensity have shown strong outperformance following periods of heightened market volatility.
"Not coincidentally, we have found that companies with the highest lobbying intensity have strong outperformance following periods of high volatility," Strategas wrote.
This advantage is believed to stem from their ability to adapt their business models in response to shifting policy landscapes, resulting in better earnings.
Strategas points out that this pattern became particularly evident after mid-July, when Vice President Harris replaced President Biden on the Democratic ticket, introducing new potential policy outcomes that companies had to consider.
As the U.S. labor market began to slow and global interest rates shifted, market volatility increased, and companies with significant lobbying efforts managed to navigate these challenges more effectively.
The note also emphasizes that the benefits of lobbying are especially pronounced in three key sectors: Technology, Health Care, and Industrials.
Strategas has tracked a "Lobbying Basket" since 2009, which has consistently outperformed the broader market, even during periods when active management struggled.
"We got the strategy right. We got the justification wrong," said the firm. "Over time, we saw continued outperformance of our large cap basket at a time when active management was struggling."
The analysts suggest that the earnings benefits from lobbying activities may be underpriced, leading to the continuous outperformance of companies in these sectors.
This analysis underscores the strategic value of lobbying for corporations, particularly in times of economic uncertainty and political change.