Yesterday, I wrote to you about the phenomenon of congressional trading and why it’s such a big issue.
If you’re like most people, you probably found some of the facts laid out in that piece shocking…
Like the 183 members of Congress that reported making at least one trade between 2019 and 2021… of which more than half sat on committees that would have given them potential access to insider information.
Or the fact that members of Congress traded nearly $400 million worth of stocks in 2022, which was 25% higher than what they traded in 2021.
All of this is unbelievable… especially when you consider that these people have busy day jobs that we elected them to.
Right now, though, I’m more interested in where all that investment money is going…
So, today and next week, I want to take a closer look at the investment habits of members of Congress. We’ll dive into the sectors and individual companies at the core of their investments… to show you how you, too, can trade a like a politician.
Congresspeople Beat the Stock Market in 2022
To say that Congress resembled a Wall Street trading desk last year wouldn’t be an understatement.
And here’s the kicker…
More than two dozen members of Congress beat the stock market in 2022. That’s despite the stock market suffering its worst year since 2008.
Let’s take a closer look at who is making the biggest trades and gains.
Below is a graph showing the members of Congress that beat the stock market and their respective gains for all of 2022.
The chart covers both the Senate and the House of Representatives. It spans both Democrats and Republicans.
Overall, in 2022, Democrats lost 1.76% on average on their investments, while Republicans gained 0.4%.
In other words, lawmakers of all political stripes on average came out significantly ahead of the market last year.
Coming in first was Rep. Patrick Fallon, who made 51.6% on his investments in 2022. The runner-up was Rep. Debbie Wasserman-Schultz, with a 50.8% gain.
Fallon’s most successive bet was on Twitter. He loaded up on $150,000 worth of shares back in January 2022 and sold it shortly after Elon Musk announced plans to acquire the social media giant.
Wasserman-Schultz made her biggest gains on shares of an energy company. She snatched up $45,000 worth of Patterson-UTI Energy, which provides drilling services for energy sources. These are precisely the types of companies that surged in value in 2022 as oil prices rose. And Wasserman-Schultz is a member of the House Natural Resources Committee.
Probably just a coincidence…
But take another look at the graph above. There’s one notable absentee on that list: Nancy Pelosi.
That’s because 2022 wasn’t exactly a good year for the tech-loving Pelosi. The outgoing House Speaker’s portfolio dropped nearly 20%. That’s worse than the 18.2% decline in the overall market.
This makes sense if you think about it…
As tech stocks soared in 2021 and 2020, Pelosi, whose district includes Silicon Valley, had recorded strong returns in both years. But as the Fed raised interest rates in 2022, the sector collapsed.
Before you rush to dismiss the financial genius of the Pelosi family, though, consider Paul Pelosi’s financial disclosure filed with the House of Representatives.
Turns out, the multimillionaire husband of Nancy Pelosi sold a bunch of shares of Google stock a month prior to the Department of Justice’s announcement of an antitrust lawsuit against the tech giant.
Pelosi reported the sale of shares in Google’s parent corporation Alphabet Inc. in three different transactions between December 20 and December 28, 2022. Together, the trades involved 30,000 shares and between $1.5 million and $3 million of assets.
Now, let me make this very clear….
This is not just a Pelosi… Wasserman-Schultz… or Fallon problem, as I discussed in yesterday’s piece.
In fact, a recent New York Times analysis found that 97 lawmakers or their family members traded financial assets over a three-year span in industries that could be affected by their legislative committee work.
This goes back to something I’ve said on multiple occasions in the past…
Anyone can own and trade shares. But not everyone makes laws, meets with corporate lobbyists, and decides how taxpayers’ money should be spent.
Where Congress Members Invest Their Money
Below is a chart showing the total value of stocks members of Congress bought in each sector in 2022.
Overall, members of Congress bought $185.6 million worth of stocks in total last year.
The key thing that stands out is that Congress’ favorite sector is technology. It was the same story across party lines.
Taken together, D.C. politicians bought $35.4 million worth of tech stocks in 2022. That’s down 29% from $49.8 million in the year prior.
In other words, lawmakers were notably less excited about the sector last year. This is understandable given the overall trend of congressional investors’ “flight to safety” (by diversifying away from riskier assets and into safer securities like government debt) that we observed amid the Fed’s rate hiking.
The other top sectors with the highest stock investments in 2022 were…
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For Democrats: Electronics, Finance, and Consumer Services
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For Republicans: Industrial, Miscellaneous, Finance, and Electronics
Why You Should Follow This Money
The good news is we don’t need to sit on the sidelines while these politicians line their own pockets.
We can follow where their money is going… and take advantage of it.
I dug into where exactly members of Congress are putting their money.
Next week, I’ll dive into the individual companies at the core of Congress’ investments. And I’ll show you how the trading action in both the House and the Senate differs, and how this knowledge can help you grow your wealth.
Happy investing, and I’ll be in touch again soon.
Regards,
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Nomi Prins
Editor, Inside Wall Street with Nomi Prins