When it comes to outperforming the stock market, members of the U.S. Congress appear to have an edge.

While Congress members can engage in stock trading, it remains illegal to act on insider information. Both Democratic and Republican representatives have reported substantial investment returns, with some achieving impressive triple-digit gains over the last decade—an achievement many investors aspire to mirror.

A notable feature of investment apps is the capability for retail investors to imitate the trading strategies of politicians and hedge fund managers. One prominent example is the Pelosi Tracker, which is inspired by Nancy Pelosi, the Democratic congresswoman and former House Speaker.

The @PelosiTracker account on social media platform X boasts nearly 900,000 followers, but potential investors should note that Autopilot has marked its risk level as “high.”

This portfolio reflects the trading activity of Paul Pelosi, Nancy Pelosi’s husband, who oversees the real estate and venture capital firm, Financial Leasing Services.

Since 2014, the S&P 500 has delivered a 230% return, whereas Paul Pelosi’s investment portfolio has seen an almost remarkable 800% increase during the same timeframe, as per investment research firm Quiver Quantitative.

Should investors follow the trends set by political figures?

Assessing the Pelosi Tracker’s Performance

In the past year, the Pelosi Tracker has achieved a notable 54% gain, outpacing nearly all U.S. hedge funds.

In light of Donald Trump’s return to political prominence, numerous Congress members, along with their partners, have engaged in trading as they strive to capitalize on this shift. Recently, Pelosi made investments in options for Amazon, Google, tech giant Nvidia, and healthcare company Tempus AI—securing purchase prices for the future.

According to law, Congress members must disclose any trades exceeding $1,000 made by themselves or their spouses within a 45-day period. Once these transactions are made public, many investors are eager to replicate their stock selections.

The primary holdings of the Pelosi Tracker include Nvidia (20% of the portfolio), followed by Google (14%), Vistra Corp (11%), Palo Alto Networks (10%), Amazon (10%), and Broadcom Inc (9%).

Nvidia stands out as one of the leading stocks in the tech sector, especially given its success in the AI landscape. Wealth management expert Garry White noted, “Pelosi is investing in sectors currently performing well, a strategy that has yielded positive results. However, should economic pressures heighten due to policy changes, a tech sell-off could follow, resulting in losses.”

Conversely, Apple recently faced challenges, hitting its lowest value since October, mainly due to weaker sales projections. Pelosi liquidated 31,600 shares of Apple in December, coinciding with a 10% decline in the stock’s worth, although it remains within the top 10 of the Pelosi Tracker.

White attributes Apple’s struggles to geopolitical tensions with China along with financial challenges, stating, “Negative perceptions surrounding Apple are mounting. This could stem from an economic slowdown and diminished consumer purchasing power for new tech products, alongside bans from the Chinese government.”

A representative for Nancy Pelosi clarified that she does not personally own any stocks and stated, “She has no prior knowledge or subsequent involvement in any transactions.”

Should You Follow the Pack?

Other Congress members with noteworthy investment success include David Rouzer from North Carolina and Texas’ Roger Williams, who reported portfolio growths of 149% and 111%, respectively, according to Unusual Whales, a platform tracking Congress trading activity.

However, investors should be cautious about blindly copying individuals. White advises against following others’ investment strategies, particularly those labeled as “gurus,” highlighting the variability in personal investment goals based on individual circumstances.

White suggested that constructing a balanced long-term portfolio tailored to personal objectives is often the best approach.

Investment experts have raised concerns about the sustainability of high valuations in technology stocks. Laith Khalaf from AJ Bell elaborated, “The anticipated surge in revenues driven by AI has propelled technology advancement, with Nvidia leading in necessary infrastructure chip production, though many others are racing to develop competing models.”

He added, “While the technology sector seems to flourish, a market correction could soon be on the horizon.”

A critical factor for investors considering political portfolios is the 45-day lag required for Congress members to publicly disclose trades, which can significantly affect investment outcomes. Khalaf emphasized the importance of independent decision-making in investments, cautioning that individuals cannot hold Nancy Pelosi accountable for their investment losses.

Political Betting Trends

Politicians in the U.S. have access to a vast reservoir of information that has led to lucrative trades timed closely with significant events—such as the Covid-19 pandemic, the invasion of Ukraine, and the collapse of prominent banks.

This raises the ongoing discussion about whether Congress members should be permitted to engage in stock trading, given their knowledge and influence, with some advocating for restrictions on active trading by lawmakers.

In 2020, former Senate intelligence chair Richard Burr faced backlash for liquidating up to $1.7 million in stocks, particularly in hotel companies, just prior to the pandemic lockdown and subsequent market downturn.

For now, many investors are opting to align their interests with those of trading lawmakers. Recently, the trading platform eToro launched portfolios influenced by political betting activities, including one that emulates Congress members’ trades.

In 2023, Unusual Whales and Subversive Capital initiated two ETFs investing in the stocks purchased by various Congress members and their families: the Unusual Whales Subversive Democratic Trading ETF (NANC, referring to Nancy Pelosi) and the Unusual Whales Subversive Republican Trading ETF (KRUZ, named after Ted Cruz).

Notably, U.S. politicians have shown a strong inclination toward technology investments. NANC is primarily comprised of tech stocks, achieving over a 29% return over the past year, outpacing the S&P 500’s 25.48%. KRUZ, while heavily invested in energy companies, achieved less than a 20% return over the same period.

Recently, KRUZ has shifted its focus, now featuring major investments in JPMorgan Chase, Nvidia, and Comfort Systems USA.

In contrast, Democratic investments remain focused on previous successful sectors. Seven of NANC’s ten major stocks are tech-related, led by Nvidia, Microsoft, and Amazon, accounting for 41% of the fund’s portfolio. The fund has roughly 12% in communication services and consumer cyclical industries, and around 10% in healthcare.

Key Considerations for Investors

Investors are cautioned that ETFs do not execute trades simultaneously with Congress members, which can affect buying and selling prices.

A common strategy among both Democratic and Republican lawmakers is prioritizing domestic investments, with U.S. stocks comprising nearly 99% of the NANC portfolio and approximately 95% of KRUZ’s.

With substantial US stock market gains largely influenced by technology shares and the recent boom in AI—areas where the UK’s FTSE 100 struggles to keep pace—it’s likely that tech stocks form a significant component of many existing portfolios.

Khalaf commented, “Numerous investors will find their exposure reflects this market reality through US and global index funds. A typical global fund may allocate 75% to US stocks, with about 33% of that invested in the top tech companies. Overall, most investors hold a considerable stake in tech stocks, making it prudent to evaluate the need for further increases in exposure carefully.”

Insights into Pelosi’s Holdings

The former House Speaker Nancy Pelosi—primarily through her husband—has built a reputation for effective stock selection that has attracted attention from American tracker funds. Imitation of indexation often reflects success.

Nonetheless, investors looking to follow her lead should remain mindful of the time gap between trades made by politicians and their disclosures, as some investment opportunities could be outdated by the time of publication.

Pelosi’s investment choices include many well-known tech firms, and no specialized finance knowledge is necessary to identify these stocks. They have proven beneficial for her and others holding them.

My own experience mirrors this, as I previously viewed Apple as a central holding within my portfolio until I shifted my strategy due to concerns about unrealized gains versus actual profits from sales.

Speculations arise that Pelosi’s recent stock sales may hint at an impending market correction. While the exact reasoning remains unclear, it raises pertinent considerations.

The frenzy surrounding AI investments may falter if driven by excessive emotional trading, prompting fluctuations from peaks of enthusiasm to troughs of despair—reminding us that stock values cannot perpetually ascend and that trends can shift unexpectedly.