MW Follow the leader. New research finds these politicians are the savviest stock pickers.
By Steve Goldstein
Study indicates a 47-point outperformance, annually, from top dogs in Congress
It's the leadership who trade profitably, according to a new study.
The tone in the stock market is looking anything but festive as December kicks off, though it should be pointed out that despite the Santa Claus rally tradition, the 12th month of the year hasn't always been favorable to stocks, with sizeable declines last year, in 2022, and in 2018.
The most notable stock-market research over the weekend comes from academia, where researchers studied those rascals in Congress and their proclivity to trade. But the new angle here is that it's actually leadership - heads of the party, plus party whips and caucus chairs - who are the stock pickers to watch.
"We find that lawmakers who later ascend to leadership positions perform similarly to matched peers beforehand, but outperform them by 47 percentage points annually after ascension," finds the study circulated by the National Bureau of Economic Research from Shang-Jin Wei, a Columbia University professor, and Yifan Zhou of Xi'an Jiaotong-Liverpool University.
That's a big gap in performance, but there's a logical explanation. First of all, leaders would have control and knowledge of the legislative agenda, not to mention influence on regulatory activity and federal procurement.
The other key difference is access to corporate executives. "After ascension, congressional leaders earn significantly higher abnormal returns on trades involving firms that either contribute to their campaigns or are headquartered in their home states-relationships likely to grant privileged access to firm-specific information," the study finds.
Another finding: leaders' stock purchases reliably indicated positive corporate news within a year, and vice versa. Furthermore, the news that the Congressional leaders tended to "predict" was information that corporate executives would have, i.e. dividend increases, and not information the executives would not have, like lawsuits.
Granted, studies on Congressional trading have some limitations, most notably that disclosure of the magnitude of trading is reported just in a range rather than set dollar amount. It's also a very small sample - between 1995 and 2021, which were the dates studied, there were a total of 47 individuals who were congressional leaders; 20 of whom made stock trades both before and after ascension to leadership. The study's methodology was to match leaders to non-leaders based on tenure, party, chamber, sex, and age. Furthermore, this is a working paper, meaning the study has yet to be peer reviewed.
It's also fair to wonder how much of this outperformance is just from Nancy Pelosi, who first ascended to a leadership role in 2001 and whose husband Paul is a venture capitalist. The study doesn't specifically split out Pelosi trades, but it does run tests excluding the most active traders, and finds leadership still wildly outperforms the rest of Congress. It also ran a test excluding the Members of Congress whose returns were the strongest, and the leadership performance gap if anything improved slightly.
The passage of the Stock Act in 2012 did result in fewer stock-market transactions for members of Congress generally, but no visible changes in terms of average stock trade size or superior return for the leaders, the study added.
The market
After what was more or less a flat November for the S&P 500, U.S. stock market futures (ES00) (YM00) (NQ00) pointed lower.
Key asset performance Last 5d 1m YTD 1y S&P 500 6849.09 2.15% -0.04% 16.45% 13.26% Nasdaq Composite 23,365.69 5.83% -0.91% 21.00% 22.59% 10-year Treasury 4.046 1.40 -6.70 -53.00 -15.20 Gold 4290.1 3.79% 6.89% 62.55% 61.17% Oil 59.43 0.92% -2.61% -17.31% -12.82% Data: MarketWatch. Treasury yields change expressed in basis points
The buzz
The Bank of Japan governor said the central bank will discuss a rate hike, a comment that lifted the yen and yields on Japanese bonds.
The key Institute for Supply Management manufacturing report is due at 10 a.m. Eastern. President Donald Trump said he's picked a Fed chair but didn't disclose who that person is.
Coupang $(CPNG)$ shares slumped as the South Korean retailer disclosed a massive data breach.
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-Steve Goldstein
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December 01, 2025 06:40 ET (11:40 GMT)
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