Our index indicates that since January 2014, senators have not, on average, outperformed the S&P 500. This is not necessarily surprising. Older senators may have chosen to hold lower volatility mutual funds that under-performed US equities in the bull market. Some senators may have picked individual stocks with little insider knowledge, and prove little better at doing so than most retail investors. These effects are enough to overwhelm excess returns that senators may have enjoyed by trading on privileged information.
However, it might be easier to tease out senators’ trading on insider knowledge during the market turmoil surrounding the Covid-19 pandemic. First, numerous senators received confidential information on the scope and likely US response to the pandemic. Second, all senators with substantial equity exposure had an interest in acting on that knowledge. Third, due to substantial market volatility, the potential return from acting was very high. Finally, the appropriate strategy – sell equities to avoid losses – was easy to implement.
To investigate, we pulled holdings and transactions from our database from January 1 – May 6 2020 and tracked senator portfolio returns relative to the S&P 500 index. One note of caution: these data are not entirely complete, since (1) senators have 45 days to file periodic transaction reports, so some recent trades may not be reported; and (2) we may miss some senators who file paper, as opposed to electronic, transaction reports.*
Since the beginning of 2020 through May 6, 2020, our “all senator” index indicates that senators beat the S&P 500 by 3.4 percentage points, losing 8.9% instead of 12.0% (Figure 1). To put that in perspective, the median senator, with $1.2M in stocks at the start of the year, would have avoided $40,000 in losses by holding our index instead of holding the S&P.
Digging a bit deeper, Figure 2 shows that while many senators suffered losses in the recent sell-off, we estimate that 35 senators beat the S&P 500. Two senators actually made gains since the start of the year – Pat Roberts (R-KS) and Tina Smith (DFL-MN). Figure 3 shows the full list of senators who have beaten the market since the start of the year. You can explore their full holdings on our main dashboard.
Image and article originally from govtrades.org. Read the original article here.