Do politicians make the best stock traders?

​Some studies show politicians make extraordinarily good stock traders in the world, often dramatically outperforming professional fund managers and the broader market. Other studies contradict this. So what is the verdict?

It’s becoming harder to ignore: strange, well-timed trades that prefigure major political announcements. 

As just one example, on 24 March 2026, more than $500 million worth of oil futures were traded roughly 15 minutes before U.S. President Donald Trump announced he was delaying military action against Iran.

Within minutes, oil prices plunged more than 10% and S&P futures rallied, making millions for those who shorted oil and went long on equities.

One of the more controversial episodes during the second Trump administration was his repeated social media posts during the infamous tariff wars. “THIS IS A GREAT TIME TO BUY” declared Trump on Truth Social on 9 April 2025.  Hours later he announced a 90-day pause on most tariffs, triggering a 9.5% one-day rally in the S&P 500, with the market recovering about $4 trillion or 70% of the value it had lost over the previous four trading days.

“It was a prescient call by the president. Maybe too prescient,” noted AP News.

Trump Media closed up 22.67%, soaring twice as much as the broader market, a stunning performance by a company that lost $400 million in the previous year and should not have been affected by the tariff announcement.

“He’s sending the message that he can effectively and with impunity manipulate the market,” government ethics law specialist at Washington University, Kathleen Clark noted. “As in: Watch this space for future stock tips.”

The Wall Street Journal took a look at Trump’s financial disclosures and found thousands of trades being executed inside the trust that holds his assets. It found heavy buying around the “Liberation Day” tariff period, and millions of dollars flowing into equities immediately after tariff announcements. That’s not counting the trades made by those in his inner circle.

Politicians may not all be brilliant investors, but few groups are closer to information capable of moving billions of dollars in market value. From tariffs and sanctions to military action and regulation, modern markets increasingly turn on political decisions. That raises an uncomfortable question: does proximity to power create the world's most valuable investment edge?

A landmark study by the University of California and Harvard University found that U.S. Senators’ stock portfolios outperformed the market by an average of 17.3% per year between 1993 and 2008. A later study covering 2004–2014 showed similar results. The pattern holds across many countries.

Why are politicians so good at trading?

Alex Krainer, in his book Trend Following Bible, explores this phenomenon and notes that politicians’ trading success is one of the clearest examples of how information asymmetry and power create massive financial advantages. He writes that the edge is so pronounced that it raises serious questions about the fairness of markets and the integrity of public office.

It’s notable that one group of investors with remarkably accurate predictive powers is U.S.senators, whose portfolios outperformed the broader equity market by 12 percentage points per year over an eight-year period, according to Georgia State University researcher Alan Ziobrowski.

This performance even surpassed that of corporate insiders, who beat the market by 5%, while ordinary investors lagged behind by 1.4%.

Krainer argues that this is not isolated to a few bad apples but is systemic. The revolving door between politics and finance, combined with lax disclosure rules in many countries, allows politicians to monetise their positions with little accountability.

It’s not hard to understand the ‘edge’ that politicians possess.

- Early access to knowledge of upcoming legislation, government contracts and policy shifts that could impact stock prices.

- Politicians are at the center of powerful networks, interacting with CEOs, lobbyists, regulators and insiders.

- They also possess the ability to influence outcomes and policy. 

Recent examples have reinforced these concerns. Multiple members of Donald Trump’s inner circle and administration have shown remarkable stock trading success during periods when they had access to non-public information.

While no criminal charges have been filed, the timing of some trades has drawn sharp criticism and renewed calls for stricter congressional trading rules.

More recent research by the National Bureau of Economic Research covering 2012–2023 concluded that, on average, members of Congress underperformed or roughly matched the market after the enactment of the STOCK (Stop Trading on Congressional Knowledge Act of 2012) Act which expressly prohibited politicians and public officials from using insider knowledge for private financial gain. It requires members of Congress, senators and certain senior officials to disclose stock trades above a threshold within 45 days.

There are now a number of websites (like Capitoltrades.com) tracking stock trades by members of Congress, their spouses and senior congressional staff. Another website, Joinautopilot.com, allows you to copy trade the portfolio of U.S.Representative Nancy Pelosi, whose portfolio is up 65% over the last two years.

A CESifo Research Network working paper found that when executives moved into senior government positions, or when former government officials joined companies, those companies experienced positive abnormal stock returns. The implication is that markets place a measurable value on political access and influence. 

That supports your broader thesis that political information and connections have financial value, even if it doesn't show politicians personally outperforming.hy momentum investing beats the ‘consensus’

Krainer’s book makes a compelling case that true market efficiency is undermined when a privileged class has access to information and influence that ordinary investors do not. He makes a compelling argument – backed by evidence – that momentum investing is the surest way to gain an edge in the market.

Trend following versus active management (1990-2025)

Source: Trend Following Bible, updated by Traders Union

Momentum or trend investing revives the age-old debate over fundamental versus technical analysis (the study of charts). The stats for day trading are abysmal: a Brazilian study in 2015 found 97% of traders who persisted for more than 300 days lost money. A similar U.S. study by Barber and Odean found that the most active traders underperformed the market by 6-7 percentage points a year, largely because of excessive trading and costs.

If 95–97% of ordinary day traders lose money, yet portfolios tracking certain politicians' disclosed trades have substantially outperformed the market over long periods, one obvious question is whether access to superior information, rather than superior investing skill, explains the difference.Most traders lack access to insider information and therefore rely on analysts and ‘market consensus’. Krainer delves into this approach and finds market consensus is often dead wrong.

The 1990s oil price collapse to around $10 a barrel provides a striking example. At the time, many believed the world was heading toward a “peak oil” crisis in which demand would vastly outstrip supply. With the global economy booming and capital flooding into telecoms and technology, investment in new oil production was neglected. Analysts widely predicted that surging demand would drive prices sharply higher. Instead, oil prices more than halved between 1997 and 1998.

Says Krainer: “The crowd is usually wrong at the most important turning points. When everyone is bullish and convinced that prices can only go higher, that is often the moment when the trend is about to reverse. The greatest profits in trading come from having the courage to stand against the prevailing consensus at the right time.”

Trends will often continue far longer than logic and sound judgment suggest. Bitcoin is another such example, outperforming every other asset class in the last decade until AI came along. Even here, we see the outlines of a consensus that the AI bubble must inevitably pop – and soon. But betting on that eventuality may be fatal to your bank balance.

Source: S&P Global

Economic forecasting is another area prone to groupthink. Even the world's foremost economists failed to foresee the downturn of the early 2000s and the global financial crisis of 2008–9, as documented in the Federal Reserve Bank of Philadelphia's Livingston Survey.

As Krainer notes, stock markets have mainly trended upward for most of the last 100 years, with occasional crashes and corrections. This made it possible for investors to generate positive returns, even if investing passively.

Decades of research led to the conclusion that expertise in the form of active fund managers, armed with degrees and volumes of data, is unable to consistently beat the market. Needless to say, the quantitative analysts on Wall Street have bet big on AI to give them an edge in the market, but the results so far are inconclusive. What is working is momentum trading – sticking with the trend as long as it lasts. That’s not to say there aren’t active fund managers who beat the market, but these are more episodic than routine.

Expert analysis

Among the many investment strategies available to retail investors, momentum investing is one of the few with robust empirical support. Decades of academic research have shown that stocks that have outperformed over the previous six to 12 months tend to continue outperforming for a period, a phenomenon observed across different markets and asset classes. Unlike trying to forecast interest rates, elections or company earnings, momentum relies on observable market behaviour rather than prediction, allowing investors to exploit the tendency of trends to persist. 

However, momentum is not a silver bullet. It can suffer sharp reversals during sudden market turning points, requires disciplined risk management, and often underperforms during periods of rapid market rotation. For ordinary investors, its greatest advantage may be psychological: it replaces subjective forecasting with a systematic, rules-based approach that removes much of the emotion from investment decisions.

Conclusion

For most investors, the edge does not come from predicting the future but from following a disciplined process that responds to what the market is already telling you. In a world where political insiders, algorithms and institutions compete for every informational advantage, a systematic trend-following approach may be the closest ordinary investors can come to levelling the playing field.