In the USA the 119th Congress constituted itself on 3 January this year. The legislative body of the United States of America, it is based in the some 200-year-old Capital building in Washington. The first Congress was established rather earlier, when the US constitution came into effect on 4 March 1789, and comprises two chambers: the Senate and the House of Representatives. While the Senate has 100 members, each of whom is elected for a six-year term by eligible voters in their state, the House of Representatives consists of 435 delegates, who are considered for re-election every two years. Although US politicians in Congress are without exception busy with lawmaking and oversight of the executive, some of them also seem to be doing well on the stock market. An analysis of documented investment by both Republican and Democratic members of Congress suggests that either they have a particular knack for selecting stocks that exceeds even that of professional asset managers, or they are exploiting their privileged position for their own benefit.
The knowledge advantage is huge: US congressmen decide laws, approve the budget and have an insight into many aspects of the economy. This insider knowledge can potentially also be converted into ready cash by positively influencing investment decisions on the capital markets. Whether that is actually the case remains open, of course. The politicians would have little to fear in this regard anyway, given that such infringements are hardly ever punished due to the looser ethical and reporting standards in the USA. Nevertheless, it may be that the delegates have a particular intuition that leads them to make clever investment decisions. Whatever the reason for the good performance of the stocks held by the lawmakers, it can't do harm for private investors to follow the stock market movements in the US Congress.
Top politician Nancy Pelosi, for instance, proved to have the right instincts around two years ago, when the former Democrat speaker divested herself of her Nvidia shares just a few days before a huge sell-off, generating a whopping return of 65 per cent in 2023. The Democratic delegates have generally had their noses in front of their Republican counterparts on Wall Street of late. Investment consultant Subversive Capital Advisor is trying to map the two political camps and their trading activities as closely as possible with its own benchmark. According to this data, shares held by Democrats appreciated in value by an average 26.8 per cent over a period of one year, compared with the “mere” 14.5 per cent of their political opponents. This clear difference can be attributed to the different orientations. While the Democrats tend to go heavy on Silicon Valley stocks in their portfolios, the Republicans put less weight on technology groups, preferring instead to include more defensive shares, such as those from the oil industry or construction, in their portfolio mix.
The experts at Leonteq are combining the best of the two political camps in the US Congressional Trader Index. The barometer contains those stocks which are actively traded by the congressional representatives and their immediate family. A proprietary quantitative algorithm is used in combination with a number of other factors, such as the total shareholding, committee membership and length of congressional service, to identify the most compelling positions based on available data. That the strategy works is demonstrated by a glance at its history: since being launched in the middle of September 2024, the index has posted growth of just under 23 per cent.