What Stocks are US Politicians Trading?

Even though the US government is shut down, politicians can still trade stocks. A controversial practice, nevertheless, some are notoriously apt at stock picking and can provide some insight into the market as a whole.

The Key Trading Elements

• Some traders are tracking the activity of US politicians in the stock market, hoping their "insider" knowledge makes them better at stock picking.
• Politicians outperformed the market last year, with a concentration in tech stocks helping boost their portfolios.
• Over the last 60 days, US politicians have invested most in mutual funds and tech stocks and significantly stepped up their buying at the start of October.

Politicians are Betting on a Rising Market

In the US, it's legal (though regulated) for high-ranking politicians and members of Congress to trade stocks, raising questions of "insider" trading since they might have access to information that isn't available to the public. There is controversy over whether politicians strictly obey the law prohibiting the use of privileged information, with some calling for a ban on the practice. Others have turned to the requirement that members of Congress disclose their trading activity to find trade ideas and potentially gain insight into the market's direction. Several websites track politicians' trading activity, and the data might offer some interesting insights.

People often focus on the more profitable politician-traders because they are naturally more intriguing than politicians who dabble in the stock market and lose money. And it's not entirely surprising that high-ranking politicians would be proficient at stock picking, since members of Congress come from all walks of life, many with extensive business experience. Some, like Treasury Secretary Scott Bessent and the junior Senator from Pennsylvania, David McCormick, are even former CEOs of hedge funds. However, it's worth noting that the most prolific (and successful) traders are not those with hedge fund experience.

Market Trends and Stock Picks

Notable politicians who trade stocks include former Speaker of the House Nanci Pelosi and Connecticut Senator Richard Blumenthal. Among the more prolific traders is California Representative Ro Khanna, who is active in campaigning against congressional trading. Louisiana Representative Cleo Fields is the most active trader, but he hasn't made the top 10 most profitable traders in Congress. On average, congressional traders beat the market last year, with Democrats obtaining an average return of 31.1% and Republicans seeing 26.1%, compared to the S&P's 23.3%.

Perhaps more interesting than who's trading is what stocks they are trading. Some Congressional members focus on areas related to their political work, such as Khanna (who represents Silicon Valley) buying tech stocks. Major large-cap stocks that have been leading gains recently, such as Google, Amazon, and Apple, are, not surprisingly, frequently bought by politicians, with Alphabet seeing a lot of recent buying. What is noteworthy, however, is that politicians increased buying at the start of October, which could indicate bullish sentiment. Over the past 60 days, buys have outpaced sells by a factor of 2. Besides the tech giants and mutual funds, US politicians have invested the most in MH Built to Last, a speciality carpentry and home renovation company. The other company is Not Fade Away, a small, boutique clothing line that specialises in environmentally friendly fashion. The question is whether politicians know something that could lead these stocks to extraordinary gains or whether they are having trouble finding value in an overextended market.

S&P 500 Overextended But Near 7k Handle

The S&P 500, for instance, trades back at record highs following a blip to 6500, with 6750 opening the door to the 7k handle, while RSI momentum wanes. In what appears to be an open triangle pattern, if the upward movement accelerates towards the upper trendline, a rejection could be the catalyst for a reversal. Major support in the medium term sits at 6150, with an interim level at 6450.

Source: SpreadEx | SPX 500