Source: Zhitong Finance and Economics
Author: Rousseau

Zitong Financial APP has learned that Democratic lawmakers have outperformed Republican lawmakers in equity portfolios in the four months from February, according to public positions in two exchange traded funds (ETF) that track the portfolios of US political leaders.

This year, those American "Capitol Hill stock gods" who have done well in investment have a lot in common, the most obvious of which is:Bet on AI technology stocksThese technology stocks have benefited from a global investor frenzy around artificial intelligence (AI), which in turn has spurred these stocks to rise sharply this year. And these stock gods belong to the same camp: the Democratic Party.

Democratic lawmakers may have achieved a return of 5.4% in just four months, well above the 3.2% performance of the benchmark S & P 500 index, according to the data. Republicans' portfolios are likely to fall by more than 2%.

It is reported that the two ETF codes are$UNUSUAL WHALES SUBVERSIVE DEMOCRATIC TRADING ETF (NANC.US)$And$UNUSUAL WHALES SUBVERSIVE REPUBLICAN TRADING ETF (KRUZ.US)$ETF products allow any investor with a brokerage account to invest in these stocks held by Democratic and Republican congressmen (and their families) at any given time, which means that NANC tracks Democratic congressmen and their family positions, and KRUZ tracks Republican congressmen and family positions. They were created by Christian Cooper (Christian Cooper), a portfolio manager at Subversive Capital, and Unusual Whales, a market research group, to draw attention to equity positions in Congress and related legislative issues.

It is understood that the positions of congressmen tracked by ETF are mainly based on the fact that lawmakers are required to disclose their stock trading within 45 days under US law. The disclosure of these transactions, as well as the annual financial reports that lawmakers are required to disclose, have enabled NANC and KRUZ to be created and exist because they can view lawmakers' portfolios in near real time.

The "stock gods" of the Democratic Party focus on AI, the hottest investment topic so far this year.

As of last Friday, NANC, which tracks Democratic lawmakers, shows that the top five stocks of the Democratic Party are$Microsoft (MSFT.US)$、$Amazon (AMZN.US)$、$Alphabet-A (GOOGL.US)$、$Apple (AAPL.US)$And AI chips deserve to be a leader.$NVIDIA (NVDA.US)$. NVIDIA Corp, who benefits from the global corporate layout AI technology, announced better-than-expected quarterly results and massive better-than-expected performance forecasts in May, providing more impetus to the upward trend of technology stocks driven by artificial intelligence. NVIDIA Corp is up 165 per cent so far this year.

Although the investment frenzy around artificial intelligence (AI hype) has pushed the share prices of companies such as NVIDIA Corp to make brilliant achievements, this wave of US technology stocks dominated by the "generative AI revolution" may come out of the amazing "long bull market". Goldman Sachs Group predicted in a research report that in addition to chip giant NVIDIA Corp, Alphabet Inc-CL C parent company Alphabet and Facebook Inc parent company$Meta Platforms (META.US)$Big technology companies such as Microsoft Corp and Amazon.Com Inc are likely to be the ultimate winners in AI, just as they have become leaders in revolutionary technologies such as the Internet and cloud computing.

The heavy positions of Republican lawmakers look completely different, describing them as "Old School" in more trendy terms. These companies include$Accenture (ACN.US)$、$Energy Transfer (ET.US)$、$Shell PLC (SHEL.US)$、$Philip Morris International (PM.US)$And$Elevance Health (ELV.US)$.

Cooper, the investment manager, points out that if these ETF had existed last year, when the energy sector rose by nearly 60%, Republicans would have beaten their colleagues on the other side. But energy stocks have lost their luster this year, hurting Republican lawmakers' portfolios.

"this is really a story about two worlds," he said in an interview this week. He points out that Democratic portfolios tend to be overwhelmingly focused on "looking to the future", a worldview that is now winning.

Overall, lawmakers on Capitol Hill outperformed the S & P 500 in their positions in 2021 and 2022, according to a Unusual Whales report.

Under the heavy pressure of public opinion, the stock trading scale of "Capitol Hill Stock Gods" has converged somewhat.

The position data of the above-mentioned congressmen are basically tracked and estimated in accordance with the disclosure documents required by US law.

In recent years, some publicly disclosed information has triggered calls from the US Congress to prohibit members of the US Congress from trading stocks of any nature, because some investors are worried that members of Congress may take advantage of their privilege to obtain information. That is, what people call "information gap" for insider trading, and then get much higher returns than the market benchmark. The call rose again during the banking turmoil in March when it was revealed that several lawmakers from both parties had sold bank shares.

However, in terms of overall data and disclosure operations, the trading volume and size of the Capitol Hill stock gods seem to have reined in this year. Cooper said both Democratic and Republican lawmakers' portfolios earn less from their intraday high-frequency trading. "with regulators increasingly scrutinizing their trading activities and under pressure from public opinion, they seem unlikely to conduct large-scale deals." "I do see some trading activity, but the volume has generally decreased," he said. "

Senator Jeff Jeff Merkley introduced his bill to restrict members of Congress and their immediate family members from holding or trading shares during their tenure.

In addition, there are still some members of Congress committed to setting more restrictions aimed at reducing the number of shares traded by Capitol Hill stock gods to zero. It is reported that at least five proposals in the current Congress seek to ban stock trading while members of Congress are in office.

But Cooper does not expect any progress in the short term, saying the chances of Congress passing a ban to rein in stock trading are "close to zero". By contrast, he wants more restrictions, such as shortening the window for disclosure and imposing larger fines on lawmakers who break the rules.

Edit / Somer