Stock Traders in Congress Beat the Market Again

2023 was a good year for the stock market. CNN reported the year’s performance stats for the three most well-known U.S. stock market indices.

S&P 500: While the broadest measure of the US stock market closed 0.28% lower on Friday, leaving it just under 30 points away from a record-high close, it gained 24% this year, ending 2023 with a bang. It also notched its ninth-straight weekly gain—the longest streak since January 2004. This year has been much kinder to the market than last: The benchmark index fell by about 20% in 2022.

Dow Jones Industrial Average: The Dow reached multiple record highs in December, including notching records in each of the past five trading sessions. It was down 0.05% Friday, closing at 37,689. In 2023, the Dow gained 14%.

Nasdaq Composite: The tech-heavy Nasdaq index was the year’s biggest star, however. Although it was down 0.56% Friday, closing at around 4769, it rose by 43% in 2023—its best performance since 2020. It remains about 1,000 points below the all-time high it reached in November 2021, demonstrating what a horrendous year tech had in 2022—and how much room it still has left to recover.

Of all these, the return for the S&P 500 represents a benchmark that 92% of professional investment managers can’t beat. Certainly not with any regularity.

But, according to the market analytics firm Unusual Whales, for the members of the U.S. Congress who actively traded stocks during 2023, no fewer than 32 beat the S&P’s 24 percent return. Here’s a summary of what they found:

1. Congress beat the market, once again. Of 100 trading members, 33% beat SPY with their portfolios.
2. Democrats beat their Republican colleagues by a massive margin.
3. Members are once again trading options, after not trading them in 2022.
4. The overall number of transactions by Congress is down. They are also reducing time to disclosure, as well as using the note feature, because people now watch them vigorously.
5. There were many unusual trades and conflicts.

The report names several members of Congress who had some unusually well-timed trades and whose committee assignments may be giving them an insider edge over the general public and professional investment managers. Seeing a name like the options trading former House Speaker Nancy Pelosi in that group may not be surprising. Still, lesser-known members like Tommy Tuberville, Kevin Hern, and Lois Frankel deserve attention for their 2023 trades.

Within the Congress, efforts in the last two years to pass legislation to curtail such unusual trading activities by elected officials have either stalled or died. There is little sign their backers have enough sway with their colleagues to even get them to a vote.

That’s not as bad as it sounds because those legislative proposals don’t go far enough. Restrictions on congressional insider trading must also extend to congressional staff and their family members. They also shouldn’t be limited to just the Congress. The same trading restrictions should apply to employees of the executive and judicial branches of the government as well.