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Congress's 65% Returns: How Politicians Keep Beating the Best Money Managers on the Planet
From perfect banking crisis exits to getting in defense stocks, the timing is uncanny
J.L. Bernstein
October 27, 2024
Happy Sunday everyone.
While Wall Street's top hedge funds struggled to beat the S&P 500 in 2023, one group of investors quietly outperformed them all: Congress.
Despite mounting public scrutiny and calls for reform, our lawmakers managed over $1 billion in stock transactions last year – and their returns weren't just good, they were extraordinary.
Let's dig in...
Congressional Trading: The $1 Billion Edge
Congress is cooking
As voters head to the polls, lawmakers’ portfolios tell a remarkable story
Despite increased scrutiny and calls for reform, Congress managed over $1 billion in stock transactions – and once again beat the market by a significant margin.
The Capitol’s Trading Edge: Breaking Down 2023’s Returns
In a year where the S&P 500 returned 24.8%, congressional trading revealed a startling pattern of out-performance:
• Senate Republicans dominated with a staggering 65% return, despite being underweight in 2023’s hot tech sector
• Senate Democrats followed with 33%, capitalizing on tech stock exposure
• House Democrats (17%) and House Republicans (12%) trailed but still managed noteworthy individual trades
The real story isn’t just in the returns—it’s where they came from. Senate Republicans achieved these gains while focusing on sectors that generally underperformed in 2023: energy, financials, and agriculture.
These numbers suggest something more than just smart sector allocation is at play.
Following the Money 💸
The most damning evidence isn't just that Congress beats the market—it's how they do it. Committee members consistently traded millions in the exact sectors they regulate:
House Homeland Security Committee bought $11.4M in tech stocks while overseeing cybersecurity policy
Sen. Tuberville traded $250,000 in agricultural futures while sitting on the Agriculture Committee
House Armed Services Committee members made 392 healthcare trades during military healthcare budget decisions
Senate Armed Services Committee sold $9.1M in tech stocks while overseeing defense contracts
In total, the House Homeland Security Committee alone moved $38M across sectors they directly oversee.
I don’t want to get too deep into this because I’m not trying to get put on some list somewhere but yes - this is interesting to look into. 🙂
Perfect Timing or Perfect Information?
When mapping their trades against global events and policy decisions, a remarkable pattern emerges:
Get on your Tinfoil hats
Pre-Conflict Defense Trades
Rep. Gottheimer purchased Northrop Grumman (NOC) on September 26
Hamas attacked Israel October 7
Position gained 16.1%
Banking Crisis Navigation
Rep. Lois Frankel sold First Republic Bank (FRC) on March 16
Purchased JPMorgan (JPM) on March 22
JPM acquisition announced shortly after
Avoided 80% drawdown
Strategic Short Positions
Sen. Thomas Carper, while sitting on the Senate Finance Committee, actively shorted U.S. markets
Gained 6.5% on ProShares Short QQQ (PSQ) positions
Perfectly timed market volatility spikes
The Options Game: Congress hangs out
with r/WallStreetBets
It’s not just retail getting leveraged to the tits. Consider these transactions:
Rep. Josh Gottheimer executed nearly $150 million in options trades during congressional sessions (returning 25% on the year)
Nancy Pelosi purchased $1.88 million in deep ITM NVIDIA calls on December 22, just weeks after Chinese President Xi’s California visit and before Biden’s semiconductor policy announcements (returning 65% on the year)
Sen. Tommy Tuberville traded $250,000 in agricultural futures while sitting on the Senate Agriculture Committee
The Reporting Gap: What We Still Don’t Know
Congress’s stellar returns in 2023 might be just the tip of the iceberg. While trading volume decreased—only 20% of Congress actively traded compared to previous years’ one-third—the trades we can see show increasingly sophisticated positioning and remarkable timing.
But systemic transparency issues cloud the full picture:
Members have 45 days to report trades—plenty of time for market-moving events to play out
Position sizes are reported in broad ranges, making exact profits impossible to calculate
Options trades often lack crucial details about strikes and expirations, especially notable given Rep. Gottheimer’s $150M in options volume
Frequent amendments and “corrections” to filings can appear months after trades happen
Looking Ahead: Election Implications
As voters head to the polls, we all face a critical question: Should lawmakers who consistently outperform professional investors while writing market regulations be allowed to trade individual securities?
Seven reform bills have been proposed since 2020. None have passed.
Want to track these trades? Public data is available through the House Office of the Clerk and Senate Office of Public Records, though the 45-day disclosure window means you'll be trading on delayed information.
Methodology: Analysis based on public disclosures through December 31, 2023. Returns calculated using median transaction values and standard portfolio theory assumptions.
Thanks for reading 🙂
- John
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