How polarized is Washington? Even 2023 stock market returns were divided by party.

The political divisions in Washington are being felt down to the returns lawmakers generate from their controversial stock-trading bets.

Perhaps the best measure of this trading — which a slew of lawmakers and outside groups say should be banned entirely — are two regularly rebalanced exchange-traded funds that allow traders to mimic lawmaker holdings by party.

The two ETFs are managed by Subversive Capital, with NANC tracking Democrats and KRUZ following the Republicans.

Since the funds launched in early February of this year, Democratic investments have outperformed the market and risen by nearly 20% while the GOP has lagged but nonetheless delivered a return just over 9%.

The returns — put another way — almost exactly split the difference between the 14.55% offered by the S&P 500 over that same period, according to Yahoo Finance data.

“We are in a divided world now,” said Subversive Capital portfolio manager Christian Cooper, who manages the two funds.

In Congress, trading is allowed as long as it is disclosed. That represents “a unique natural experiment” to see the political divide play out in financial markets, Cooper said.

Similar divergent returns based on partisanship are also in evidence among two other ETFs that track politics and stocks.

The Point Bridge America First ETF (MAGA) — focused on companies with employees who are highly supportive of Republican candidates — has also trailed a mirror-image Democratic Large Cap Core ETF (DEMZ) over the year.

Looking ahead to 2024: Will it flip to the GOP?

The differing results in 2023 among lawmakers were largely based on outsized Democratic investments in high-flying tech stocks, especially those exposed to AI.

Democratic lawmakers’ top five equity holdings are currently Microsoft (MSFT), Amazon (AMZN), Apple (AAPL), Salesforce (CRM), and Alphabet (GOOG).

One prominent Democrat was also in the headlines in recent days with the news that the Pelosi household is again invested in Nvidia (NVDA) after staying away in recent months, according to recent disclosures.

Speaker Emerita Nancy Pelosi’s husband Paul, a venture capitalist, made the trades and is not informed, both Pelosis have repeatedly said, by anything gleaned on Capitol Hill.

US Representative Nancy Pelosi (D- CA) and her husband Paul Pelosi arrive for an official State Dinner in honor of India's Prime Minister Narendra Modi, at the White House in Washington, DC, on June 22, 2023. (Photo by Stefani Reynolds / AFP) (Photo by STEFANI REYNOLDS/AFP via Getty Images)

Speaker Emerita Nancy Pelosi and her husband Paul arrive for a state dinner in honor of India’s Prime Minister Narendra Modi at the White House on June 22, 2023. (STEFANI REYNOLDS/AFP via Getty Images) (STEFANI REYNOLDS via Getty Images)

The top GOP holdings look very different. Republican investors are currently centered around ConocoPhillips (COP), NGL Energy Partners LP (NGL), Shell (SHEL), Accenture plc (ACN), and Elevance Health (ELV).

While GOP lawmakers and the investors who followed them might have come up short in 2023, Cooper sees a potential shift towards those holdings in 2024.

He said factors from energy volatility to a potentially slower-than-expected cadence of Federal Reserve rate cuts to a widening conflict in the Middle East could move the focus away from things like AI to what he calls the more pragmatic focus seen in many GOP portfolios, especially energy stocks.

“All of those things point to favoring KRUZ in 2024,” he added.

That potential, if it does come to pass, would be similar to the shift that occurred between 2022 and 2023. In 2022, GOP holdings would have outperformed the market as a whole if these ETFs had existed, largely fueled by an energy sector that jumped nearly 60%.

Lawmakers as a whole beat the S&P 500 both in 2021 and in 2022, according to reports from Unusual Whales, which provides the data to Subversive Capital.

The DEMZ and MAGA funds focused on the political leanings of companies have both been around for longer. Comparing those funds since 2020, when DEMZ began trading, shows that longer-term returns have favored Republicans by that measure even after the recent strong year for progressives.

The efforts to ban trading by lawmakers

This year, ongoing efforts to ban lawmaker stock trading again fall short.

One bipartisan effort in the House now has 69 co-sponsors while another effort was just reintroduced earlier this month. That latter bill aims to ban not just lawmakers but also the president and vice president, Supreme Court justices, and top Federal Reserve Board officials from owning nearly all individual stocks.

“The American people need to know that their elected leaders are putting their constituents’ interests — not their own financial interests — first,” says Senator Kirsten Gillibrand (D-N.Y.), who is pushing the more far-reaching bill.

The efforts aim to update the current rules, which have been in place since they were signed into law by then-President Obama. That 2012 legislation clarified that insider trading laws applied to lawmakers and also instituted a requirement that lawmakers disclose their trades within 45 days.

Those trade disclosures — along with annual financial reports — are what allow the NANC and KRUZ ETFs to exist by harvesting a near-real-time look at lawmakers’ portfolios.

But the efforts to ban the practice appear to have an uphill climb to get on Washington’s agenda in 2024 even after another string of revelations including lawmakers from both parties who sold banking stocks during the financial turmoil in March.

Ben Werschkul is Washington correspondent for Yahoo Finance.

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