How Is the Gaza Conflict Weighing on US Congressional Trading?
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Trading of stocks and other securities by U.S. Congress members has long been a controversial topic amongst groups. Despite the STOCK Act which was introduced to promote transparency in 2012, there have been numerous cases where lawmakers were found to be trading using inside information.
Politicians who sold ahead of the COVID lockdowns in 2020 as well as major stock selling that occurred ahead of the banking crisis in early to mid-2023. 2023, it seems, was a year of roller-coaster rides for world and geopolitical events. Adding another dimension to these events was the presence of heightened stock trading in issuers that would be affected by these events.
U.S. Military Spending Post Oct 7
On Oct 7, Hamas, a militant group attacked Israel, resulting in nearly 1,000 fatalities. This in turn resulted in a full-fledged conflict where Israel bombed Gaza aerially adding to further fatalities and losses of lives. In the midst of this, the USA, a long ally of Israel, voiced its support for the latter. U.S. President Joe Biden passionately conveyed his support for Israel and pushed for the provision of military aid.
Around the time of these circumstances, it was unsurprising that several U.S. Aerospace and Defense stocks saw a surge in their stock prices. In manufacturing and providing military equipment, defense contractors are funded by the government and such situations can often result in a bull run. Furthermore, a report dated Dec 1, 2023 states Congress and the Biden administration allocated $842 billion for military spending in 2024. The new spending budget is $26 billion higher than that of 2023 and excludes the supplemental bills for military aid that POTUS intends to supply to Ukraine and Israel.
Since Oct 6 - the day before the conflict’s first chapter - Lockheed Martin Corp’s (LMT:US) stock is up by 14.25%, Rtx Corp (RTX:US) is up by 22.55%, & Rheinmetall AG (RNMBY:US) is up by 37.38% respectively.
Lockheed Martin was traded eleven times by Congress throughout 2023. Within this, it was purchased by Rep. Dan Goldman on Jan 31 and by Rep. Kevin Hern on March 24 and June 23. Goldman sits on the Homeland Security Committee while Hern is seated on the Ways and Means Committee.
In comparison, RTX was traded 18 times of which seven were purchases. Goldman, Hern, Sen. Tom Carper, and Sen. Markwayne Mullin were the stock’s investors.
Congressional Trading
Aerospace and defense stocks saw an influx of trades from U.S. Politicians in 2023. Despite the sector’s mediocre performance against the broader market, the sector has been quite a favorable trading ground for Congress members for a long time.
Considering price returns, Rep. Lois Frankel may have fetched the most profits with her early May 24 purchase of General Dynamics Corp (GD:US) when the stock closed at $206.53. Although she also sold a portion of the stock on Sep 8, selling more GD shares today could fetch profits of up to 24.04%. Another similar well-timed and profitable trade was by Rep. Josh Gottheimer seated on the Select Committee on Intelligence.
In an example of a well-timed trade, Senator Markwayne Mullin, who joined the Senate in 2023 after serving as Representative for a decade, bought RTX shares on Oct 3 and previously on Sept 13. Summed up both transactions would be valued at as much as $65,000. Sen. Mullin serves on the Senate Committee on Armed Services.
Rep. Gregory Stanton’s spouse bought Axon Enterprise Inc (AXON:US) stock on Sep 26 via an investment firm along with stocks from more than 90 issuers. They later sold this along with several other stocks as per their policy of not owning individual stocks - a fact that was not known to the firm. In the time between, the stock had gathered about 12.5% worth of profits.
In a nutshell, there were a total of 96 transactions in Defense stocks in 2023 by the U.S. lawmakers. 22 were purchases of stocks and eight of these purchases took place in the days after October 7.
