Where Congress Invests? Top 5 US Politicians’ Beloved Stocks

Despite a number of controversies and ongoing debates about trading oversight, US politicians and Congress members continue to trade stocks — successfully. In 2023, for example, 33 out of 100 trading members of the US Congress beat the SPDR S&P 500 ETF Trust (SPY), according to an early 2024 report. 

But what stocks are politicians investing in to achieve this kind of success? Disclosure rules are intended to mitigate issues pertaining to trust and conflicts of interest by allowing the public to track the investment activities of House and Senate members. In this guide, we’re taking a look at Congressional portfolios to dig up the top 5 US politicians’ beloved stocks.

Politician stock trading

Politician stock trading refers to the practice of elected officials and government employees buying or selling shares of publicly traded companies. While often associated specifically with members of Congress (referred to as congressional stock trading), it also includes other officials.

Politicians from both parties enjoy strong financial gains from stock trading, although Democratic members of Congress outperformed their Republican counterparts in 2023, earning around 13% more. This is likely due to Republicans favoring investments in financials and oil, whereas Democrats leaned toward tech stocks, which saw fewer challenges last year.

Were the profits a result of insider trading? It is, of course, illegal for politicians to trade based on non-public information, with the Stop Trading on Congressional Knowledge (STOCK) Act being there to prevent members of Congress from profiting from insider knowledge. However, as long as stock transactions exceeding $1,000 are reported within 45 days, politicians are free to trade them as they like.

Elected officials and government employees are not prohibited from trading or owning public company securities as long as they do so legally. However, the practice remains controversial, with both lawmakers and the public frequently calling for a ban on politician stock trading.

The controversy arises from the gray zone that politicians occupy regarding insider trading laws. Although legislation outlines how politicians should conduct legal stock trades, enforcement is challenging, and proving illicit activity can be difficult.

According to a 2024 paper, legislators tend to act on informational advantage (i.e., insider information) particularly at time of increased market uncertainty:

“We observe that, except for periods characterized by unusual market volatility and uncertainty, short-term abnormal returns of politicians’ buy transactions are very strongly and positively correlated with economic policy uncertainty. Their sale transactions on the other hand do not generally vary with changes in economic policy uncertainty. Overall, these findings imply that legislators act on informational advantage to pick the right stocks for buys precisely during times when increased market uncertainty, effected by heightened economic policy uncertainty, could instead discourage buy trades or intensify the risk of losses.” — Ma and Moe (2024)

The importance of understanding Congressional investing

[Image: Congressional stock trading ethics]

“While one can argue that politicians can make their portfolio choices as any regular investor, politicians are likely to own a firm’s stock for three distinct (though not mutually exclusive) reasons… The first reason is that stock ownership by politicians is a repayment for the political donations and support from a firm.… The second reason is that firms’ support and contributions to politicians bring benefits to the firms, and the politicians invest to obtain some financial gains from these benefits. The third reason is that ownership by politicians serves as an insurance for taking actions that benefit the firm (e.g., not enacting regulation that might harm the firm, helping the firm get government contracts).” — Tahoun (2014)

What insights can public disclosures of Congressional trades offer, and how can they influence retail trading decisions?

When insiders, including politicians, buy stocks, it typically signals confidence in their performance and future potential. For instance, Nancy Pelosi drew a lot of attention when her NVIDIA (NASDAQ: NVDA) call options, valued between $1 million and $5 million, yielded over $500,000 in just two months. Even Jordan Belfort speculated that she might have acted on confidential information.

Politician stock selling is more ambiguous, as there can be various reasons for offloading shares. While it might suggest a bearish outlook for the stock, it could also imply a need for liquidity. Comparing these trades with those of other politicians or company insiders can offer more clarity. That is, if multiple insiders are selling, it could signal a broader issue with the company and prompt a cautious approach.

Conversely, if multiple politicians are investing in the same sector, it may signal an emerging trend. A prime example is the 2020 trading scandal, in which several US senators purchased stocks in healthcare companies involved in immunization and PPE while selling shares in industries like hospitality and oil, which were adversely affected by lockdowns.

Top 5 stocks held by US politicians

Given the overwhelming preference for tech stocks among Members of Congress, the list of the 5 most favored stocks by US politicians in the last year will perhaps not come as a surprise:

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#1. Microsoft (NASDAQ: MSFT)

According to Capitol Trades, 24 politicians have traded MSFT stock in the past year, with the total trading volume reaching $87.51 million. The stock is favored by both Republican and Democrat investors, although Democrats leaned into it a bit more, given their preference for tech stocks. Being that Microsoft briefly surpassed Apple in terms of market cap earlier in 2024, it is hardly surprising that its shares rose in popularity. 

#2. Alphabet (NASDAQ: GOOGL)

GOOGL shares have seen 114 trades in the past year, according to Capitol Trades, just 3 trades below MSFT. However, the total trading volume was significantly lower (around $3.48 million). 

#3. Apple (NASDAQ: AAPL)

Apple is consistently the largest US company by market cap, so its inclusion on the list is to be expected. According to Capitol Trades, AAPL shares have been traded 87 times by 23 politicians in the past 12 months. Republicans generally value Apple for its contributions to US competitiveness in the global tech market, while Democrats often praise the company’s environmental efforts and commitment to privacy. 

#4. JPMorgan Chase & Co (NYSE: JPM)

JPMorgan shares break the tech stock streak. In the past 12 months, JPM shares have been traded 80 times by 20 politicians, with the total volume reaching $32.65 million. Unsurprisingly, the majority of traders were Republicans.

#5. Meta Platforms (NASDAQ: META)

Although Democrats prefer tech stocks more on average, the majority of META trades in the past year were made by Republicans. According to Capitol Trades, Republicans have made 45 META trades in the past year, while Democrats were responsible for only 19. All in all, the stock saw a total volume of $2.89 million.

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Differences in Politician Stock Trading Between Parties

Rival parties show notable differences in trading patterns, preferences, and strategies when it comes to stock trading

In 2023, for example, Democrats heavily favored tech stocks, with Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOGL) topping their buy lists. Republicans, on the other hand, leaned towards traditional and energy sectors, purchasing stocks like ConocoPhillips (COP), Tyson Foods (TSN), and Energy Partners (NGL).

When it comes to selling, Republicans tended to sell Microsoft (MSFT), Pioneer Natural Resources (PXD), and Energy Transfer (ET), while Democrats focused on selling Microsoft (MSFT), Activision Blizzard (ATVI), and Liberty Media (FWONK).

In terms of trading volume, Democratic representatives were more active, selling over $96 million in stocks and buying approximately $59 million. Republican representatives, by contrast, sold about $78 million and bought $42 million. When it comes to the Senate, however, Republicans outpaced Democrats in both buying ($18 million vs. $7.4 million) and selling ($10 million vs. $3.2 million) activities.

Which political party profits more from stock trading?

In 2023, Democrats significantly outperformed Republicans in stock returns. While Republicans saw an average return of 17.99%, which lagged behind the SPY index’s 24.81% gain, Democrats achieved a remarkable 31.18% return.

The difference in profits is largely due to Democrats’ focus on technology stocks, which generally had a strong year. Republicans’ investments in energy, financials, and commodities, however, faced challenges from banking crises and volatile inflation rates.

The bottom line

Despite controversies and debates surrounding potential conflicts of interest, politicians continue to participate in the stock market, often outperforming it. By investigating Congressional stock trading, we can thus gain insight into market trends and growing sectors with a potentially bearish outlook. 

However, it’s important to approach this information with caution. While public disclosures shed light on politicians’ investments, they don’t guarantee market success for the retail investor — or protection against risks. As with any investment approach, thorough research and an awareness of the complexities involved in political stock trading are essential for making informed decisions.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

FAQs about stocks favored by US politicians

How can you track politicians’ stock trades?

To track politicians’ stock trades, you can use Finbold Signals and receive updates via Email, Telegram, or Discord.

What stocks are members of Congress buying?

Members of Congress commonly invest in sectors like technology, healthcare, and defense. Popular picks include companies such as Apple, Microsoft, and Alphabet.

What stocks are Democrats buying?

Democrats tend to focus on the tech sector, with frequent investments in companies like Google, NVIDIA, and Apple.

What stocks are Republicans buying?

Republicans typically prefer energy stocks although they also invest in large-cap value stocks such as JPMorgan Chase and NVIDIA.

Is politician stock trading legal?

Politician stock trading is legal, provided it is not done based on insider information and provided it complies with the STOCK Act and other relevant legislation.