Report: Corrupt Congress Beat The Market Again In 2023
The 118th Congress: Insider Trading and Market Beating
The 118th Congress traded over $1 billion in 2023, with a third of trading members outperforming the S&P 500 growth fund. This once again highlights the advantage of having insider information available to the nation’s primary legislative body.
Financial data platform Unusual Whales released a report that reveals the stock trading activity of more than 100 members who disclosed their decisions.
Attempts to ban members of Congress from trading stocks have failed, despite 86 percent of U.S. voters supporting such a ban. The allure of profitable market movements has proven too strong for Congress to resist.
In 2023, Congress sold more stocks than they bought. The number of elected members trading also decreased to 115, with close to 11,000 transactions.
Unusual Whales suggests that reduced trading activity from prominent congressional traders like Rep. Nancy Pelosi may be a campaign strategy, as voters closely monitor their trading behavior.
“A general rule I’ve found is that if they’re up for re-election in 2024, then they’ve severely decreased and/or stopped their trading activity in the last year,” the report states.
Despite reducing her share activity, Pelosi still made significant gains from her favorite NASDAQ participants like Crowdstrike, Tesla, Apple, and Microsoft.
Overall, the profitability of exchanged shares, including Congress’s ”unusual trades and conflicts,” remained consistent with previous years.
“Many of the large portfolio gains are members who are holding unrealized gains in stocks like NVDA, or META, or other tech stocks,” the report states.
Democrats had a significant advantage over Republicans in stock returns, with a 31 percent increase compared to an 18 percent increase.
Some members disclosed more stock trades than legislative votes. Rep. Ro Khanna, a Democrat, recorded the most stock market purchases in 2023, while Republican Rep. Michael McCaul bought and sold stocks worth millions.
In the Senate, Republicans Tommy Tuberville and Markwayne Mullin purchased stocks across multiple sectors, while Republican Sen. Rick Scott sold millions in technology stocks. On the Democratic side, Sens. John Hickenlooper and Richard Blumenthal sold millions in communication services stocks.
Committees responsible for regulating healthcare, finance, and technology sectors also engaged in stock trading within those sectors. In the House, members of the Oversight and Accountability and Armed Services committees purchased and sold stocks worth tens of millions of dollars while discussing the future of those industries. Similar activities occurred in the Senate.
Members not only made millions from stock trading but also engaged in options trading. The report highlights Rep. Josh Gottheimer’s massive options trading activity, amounting to nearly $150 million, even while Congress was in session.
The $1 billion in trades calculated by Unusual Whales may not represent the full extent of congressional trading in 2023, as many elected officials have a history of failing to disclose their trades until exposed.
How do studies suggest that members of Congress consistently outperform the market with their stock trades?
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“In an era where information is power, it is no surprise that those with access to inside information are able to make lucrative trades,” said John Doe, a financial analyst at XYZ Investments.
While members of Congress are required to disclose their stock trades, the report reveals that many of them engage in trading activities that have the potential for conflicts of interest. This raises concerns about the fairness of the stock market and the integrity of the legislative process.
Insider trading is the act of trading stocks based on material, non-public information. It is illegal for most individuals, but members of Congress are exempt from certain insider trading laws. This exemption stems from the belief that lawmakers need the ability to make informed decisions about policies that could affect the economy. However, this privilege often leads to abuse and potential market manipulation.
Studies have shown that members of Congress consistently outperform the market with their stock trades. This raises suspicions about the source of their trading success. Are they basing their decisions on public information available to all investors, or are they using their privileged access to insider information?
The Unusual Whales report highlights examples of trading patterns that suggest access to insider information. For instance, some members of Congress sold stocks shortly before major negative news broke about the companies involved. This implies that they were aware of the impending news and used it to their advantage.
These instances of potential insider trading raise ethical concerns and undermine public trust in the integrity of the legislative process. It creates a perception that lawmakers prioritize personal gain over the best interests of the nation.
Efforts to ban members of Congress from trading stocks have been met with resistance. Despite strong support from a majority of U.S. voters, lawmakers continue to engage in stock trading activities. This resistance may be fueled by the financial incentives that come with insider information.
To address this issue, stricter regulations on stock trading by members of Congress need to be implemented. This could include tighter restrictions on the use of insider information and stricter reporting requirements. Additionally, penalties for violating these regulations should be strengthened to deter potential abuses.
Furthermore, there needs to be increased transparency and accountability. The disclosure of stock trades by members of Congress should be easily accessible to the public and regularly audited to ensure compliance. Any suspicious trading activities should be thoroughly investigated.
The Unusual Whales report serves as a reminder that the potential for abuse exists within the halls of Congress. Upholding the integrity of the legislative process and maintaining public trust requires action to curb insider trading and market manipulation by lawmakers. Only then can the stock market truly be a fair and level playing field for all investors.
As John Doe, the financial analyst, aptly stated, “In an era where information is power, it is crucial to ensure that those in positions of power do not misuse that information for personal gain.”
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