Recently, Congressional stock trading has faced heightened scrutiny, fueled by concerns over potential conflicts of interest and the unfair advantage that lawmakers may wield in financial markets.
The spotlight on this issue intensified when US senators introduced the ‘Ban Congressional Stock Trading Act,’ a proposed legislation aiming to mandate members of Congress, their spouses, and dependent children to either place their stocks in a blind trust or divest their holdings.
While the act is yet to be approved, issues associated with Congressional stock trading continue. On Monday, November 20, one US senator made a particularly questionable trade, drawing significant public attention.
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On November 8, Senator Tina Smith invested $250,000 in shares of Tactile Systems Technology (NASDAQ: TCMD), a company that makes medical devices for treating lymphedema and chronic swelling and healing of venous ulcers.
Tactile Systems is a small healthcare stock, and Senator Smith sits on the Senate Committees on Health. The company is based in Senator’s home state of Minnesota and has received millions of dollars worth of government contracts so far, even though it is a small company with a market cap of less than $300 million.
In just two weeks after Smith’s investment, TCMD gained more than 19%, according to Quiver Quantitative.
Historically, TCMD has been a volatile stock, Quiver noted, and this surge is its biggest two-week increase in months.
Congress betting against the US economy
The revelation of Smith’s fishy investment in TCMD comes amid a fascinating period when it comes to Congressional stock trading.
Namely, US representatives have been taking a notably bearish stance on the domestic economy in the stock market. In 2023, approximately 64% of their total trading volumes were attributed to sales.
This marks a departure from historical norms, where the percentage of trading volume from sales by Congress members ranged between 44% and 56%. The recent trend suggests a noteworthy shift in the trading behavior of US politicians towards a more pessimistic outlook in recent months.
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