Financial Services Agency, January 2. Various signs suggest that Washington's political differences are affecting US congressmen. For example, the returns from their controversial stock deals are very different.

In February 2023, investment company Subversive Capital Advisor and data center Decisive Whales launched two ETFs, each to track the investments of Democratic lawmakers$UNUSUAL WHALES SUBVERSIVE DEMOCRATIC TRADING ETF (NANC.US)$and a fund that tracks the investments of Republican lawmakers$UNUSUAL WHALES SUBVERSIVE REPUBLICAN TRADING ETF (KRUZ.US)$. The former was named after former House Speaker Nancy Pelosi, while the latter was a “tribute” to Republican Senator Ted Cruz (Ted Cruz).

Now that the first year of the two funds has come to an end, what about their report cards?

Statistics show that since the launch of these two funds in early February of this year, the investment performance of the Democratic Party's “stock giants” has been superior to the US stock market, and far superior to the Republican “stock gods” — NANC's rise so far is close to 20%. In comparison, KRUZ's return rate is only slightly higher than 9%.

Looking at it another way, the average return of these two funds is basically the same as the 14.55% increase in the S&P 500 index over the same period.

Christian Cooper, portfolio manager at Subversive Capital, who manages these two funds, said, “We are now in a divided world.”

In the US, as long as their investment information is publicly disclosed, US congressmen are allowed to trade stocks. According to Cooper, this is a “unique natural experiment” that can see how political differences manifest in financial markets.

Why did “Nancy” win?

The huge difference in performance between the “stock giants” of the two parties in 2023 is mainly due to the Democratic Party's overinvestment in high-growth technology stocks, especially large allocations in technology stocks that bet on artificial intelligence.

Statistics show that the top five stocks currently held by Democratic lawmakers are Microsoft, Amazon, Apple, Salesforce, and Google's parent company Alphabet.

Even at the end of the year, Democrats are still making frequent moves in tech stocks. According to an announcement disclosed in late December, Pelosi's husband bought another 50 Nvidia call options worth between 1 million and 5 million US dollars on November 22.

In contrast, the main holdings of Republican lawmakers seem very different from those of Democratic shareholders. Currently, the main holdings of Republican lawmakers are concentrated in Conoco Phillips (Conoco Phillips), NGL Energy Partners LP, Shell (Shell), Accenture plc (Accenture plc), and Elevance Health.

Will KRUZ rise in 2024?

It is worth mentioning that despite the poor performance of the Republican shareholders in 2023, Cooper believes the market may be biased towards their holdings in 2024.

He believes that energy fluctuations and the pace of interest rate cuts by the Federal Reserve may be slower than expected. Coupled with factors such as the expansion of the Middle East conflict, they may gradually shift people's attention from fields such as artificial intelligence to more practical fields seen in many US Republican investment portfolios, especially energy stocks.

Cooper added that all of these factors indicate that KRUZ in 2024 will be favored.

He added, “If this possibility does arise, then this will be similar to the transformation that will take place between 2022 and 2023. In 2022, if the two ETFs mentioned above already exist, the performance of shares held by Republicans will surpass the market, mainly driven by a sharp rise of nearly 60% in the energy industry.”

Overall, the investment returns of congressmen's portfolios in 2021 and 2022 surpassed the S&P 500 index, according to a report by Significant Whales.

Editor/Corrine