Political divisions in Washington are felt to be spilling over into the profits lawmakers make from controversial stock trade bets.
Perhaps the best vehicle for this trade is two regularly rebalanced exchange-traded funds (ETFs) that allow traders to mimic the holdings of members of Congress by political party, and many members of Congress and outside groups. They argue that it should be completely banned.
The two ETFs are managed by Subversive Capital, with NANC tracking Democrats and KRUZ tracking Republicans.
Since launching the fund in early February, Democratic investments have outperformed the market, rising nearly 20%, while Republicans have lagged but still returned just over 9%.
In other words, this return almost exactly bisects the 14.55% difference provided by the S&P 500 over the same period, according to Yahoo Finance data.
“We are in a divided world right now,” said Christian Cooper, a portfolio manager at Subversive Capital, which manages two funds.
Congress allows transactions as long as they are made public. Cooper said this represents a “unique natural experiment” in which political polarization plays out in financial markets.
Two other ETFs that track politics and stocks reveal similarly divergent returns based on partisanship.
The Pointbridge America First ETF (MAGA), which focuses on companies whose employees strongly support Republican candidates, has also lagged behind its mirror image Democratic Large Cap Core ETF (DEMZ) over the past year. Ta.
Looking ahead to 2024: Will we turn Republican?
The divergent results among lawmakers in 2023 were largely based on Democrats’ large investments in high-flying tech stocks, especially those exposed to AI.
top Democratic Party member Holds 5 stocks Currently, they are Microsoft (MSFT), Amazon (AMZN), Apple (AAPL), Salesforce (CRM), and Alphabet (GOOG).
A prominent Democrat has also made headlines in recent days for implicating the Pelosi family. is being reinvested in Nvidia (NVDA) has been on the sidelines in recent months, according to recent disclosures.
Both Pelosi and Pelosi have repeatedly said they were not informed about what was collected at the Capitol, even though Speaker Nancy Pelosi’s husband, Paul, a venture capitalist, made the deal.
of Republican top holdings It looks very different. Republican investors are currently focused on ConocoPhillips (COP), NGL Energy Partners LP (NGL), Shell (SHEL), Accenture plc (ACN), and Elevance Health (ELV).
While Republicans and the investors who followed them may be cash-strapped in 2023, Cooper believes they could shift into these holdings in 2024.
He said factors such as energy instability, the pace of Federal Reserve rate cuts that may be slower than expected, and escalating conflict in the Middle East are shifting focus away from things like AI. what does he call A more pragmatic focus seen in many Republican portfolios, especially energy stocks.
“All these things point to Mr. Kurz’s advantage in 2024,” he added.
If that becomes a reality, the potential would be similar to the changes that occurred between 2022 and 2023. If these ETFs existed, Republican holdings would have outperformed the overall market in 2022. This would have been mainly supported by a surge in the energy sector. Almost 60%.
The Congress overall outperformed the S&P 500 in both 2021 and 2022. Go to report From Unusual Whales, which provides data to Subversive Capital.
DEMZ and MAGA funds, which focus on the political leanings of companies, have both been around for a while. Comparing these funds since 2020, when DEMZ began trading, shows that long-term returns favor Republicans by that measure, despite recent strong years for progressives.
Lawmakers’ efforts to ban transactions
Continued efforts to ban trading in Congressional stocks failed again this year.
One of the bipartisan efforts in the House is currently 69 co-sponsors while making other efforts It was just reintroduced earlier this month. The latter bill aims to ban members of Congress, as well as the president and vice president, Supreme Court justices and Federal Reserve officials, from owning nearly all individual stocks.
“Americans need to know that their elected leaders are putting the interests of their constituents first, not their own economic interests,” said Kirsten, who is pushing for the broader bill.・Senator Gillibrand (New York) says:
This initiative aims to update the current regulations that have been in place since the law was enacted. by then President Obama. The 2012 bill clarified that insider trading laws apply to members of Congress, and also created a requirement that members disclose their trades within their 45 days.
But efforts to ban the practice will have a hard time making it onto Washington’s agenda in 2024, even after a series of revelations, including that lawmakers of both parties sold bank stocks during the March financial turmoil. It seems to accompany it.
Ben Werschkul is Yahoo Finance’s Washington correspondent.
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