Various signs indicate that political divisions in Washington are affecting US congressmen, such as vastly different returns from their controversial stock trading.
In February 2023, investment firm Subverse Capital Advisor and data center Unusual Whales launched two ETFs, namely NANC, a fund that tracks investments by Democratic lawmakers, and KRUZ, a fund that tracks investments by Republican lawmakers. The former was named after former Speaker of the House Nancy Pelosi, while the latter paid tribute to Republican Senator Ted Cruz.
And now, the first year of these two funds has come to an end, and what about their transcripts?
Statistics show that since the launch of these two funds in early February this year, the investment performance of the Democratic "stock gods" has been better than that of the US stock market, far surpassing that of the Republican "stock gods" - NANC, which has risen nearly 20% so far. In contrast, KRUZ's return rate is only slightly higher than 9%.
Looking at it from a different perspective, the average return rate of these two funds is basically equivalent to the 14.55% increase in the S&P 500 index during the same period.
"We are now in a divided world," said Christian Cooper, portfolio manager at Subverse Capital, who manages these two funds.
In the United States, as long as its investment information is publicly disclosed, stock trading by US Congress members is allowed. Cooper stated that this is a "unique natural experiment" that can see the manifestation of political differences in financial markets.
Why did "Nancy" win?
The significant performance difference between the two parties' stock gods in 2023 is mainly due to the Democratic Party's excessive investment in high growth technology stocks, especially in those betting on artificial intelligence themes.
Statistics show that the top five stocks currently held by Democratic lawmakers are Microsoft, Amazon, Apple, Salesforce, and Alphabet, the parent company of Google.
Even at the end of the year, Democrats still make frequent moves in technology stocks. According to the announcement released in late December, Pelosi's husband bought another 50 NVIDIA call options worth between $1-5 million on November 22nd.
In contrast, the main shareholding of Republican lawmakers appears to be very different from that of Democratic stock gods. The main holdings of Republican lawmakers are currently concentrated in Conoco Phillips, NGL Energy Partners LP, Shell, Accenture plc, and Advantage Health.
Will KRUZ rise in 2024?
It is worth mentioning that despite the poor performance of Republican stock gods in 2023, Cooper believes that the market may lean towards their holdings in 2024.
He believes that energy fluctuations and the possibility of slower than expected rate cuts by the Federal Reserve, coupled with factors such as the escalation of conflicts in the Middle East, may shift people's focus from areas such as artificial intelligence to more pragmatic areas seen in many Republican investment portfolios in the United States, especially energy stocks.
Cooper added that all these factors indicate that KRUZ in 2024 will be favored.
He added, "If this possibility really arises, then it will be similar to the transformation that occurred between 2022 and 2023. In 2022, if the aforementioned two ETFs already exist, Republican stocks will outperform the market, mainly driven by the energy industry's nearly 60% surge."
According to the report by Unusual Whales, overall, the investment returns of congressional portfolios in 2021 and 2022 exceeded those of the S&P 500 index.