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Study Finds Congressional Leaders Outperform Peers by 47 Points Annually December may be known for the “Santa Claus rally,” but early market action suggests anything but holiday cheer. And while investors debate the year-end outlook, new academic research is shining a spotlight on an unlikely group of standout stock performers: Congressional leaders. A study released through the National Bureau of Economic Research reveals that lawmakers who rise to leadership positions—party heads, whips, and caucus chairs—dramatically outperform their peers in stock trading. Before taking leadership roles, their trading results look similar to those of comparable members. Afterward, they beat those peers by an astonishing 47 percentage points per year. The researchers, Shang-Jin Wei of Columbia University and Yifan Zhou of Xi’an Jiaotong-Liverpool University, point to clear advantages: leaders influence the legislative agenda, have visibility into regulatory actions, and often interact with key figures in federal procurement. They also gain greater access to corporate executives. In fact, the study finds that after stepping into leadership, these lawmakers earn substantially higher abnormal returns on trades involving companies that contribute to their campaigns or are based in their home states—relationships that can provide privileged, company-specific insights. Their trades appear to anticipate good news, too. Stock purchases by leaders reliably preceded positive corporate developments within a year, such as dividend increases—information executives would likely know in advance. By contrast, their trades did not predict events executives wouldn’t know about, like lawsuits. Still, the study isn’t without limitations. Congressional trading disclosures only show ranges, not precise amounts, and the sample is small: between 1995 and 2021, only 47 individuals served as leaders, and just 20 traded both before and after rising to leadership. The research is also a working paper awaiting peer review. Some might suspect the results are heavily influenced by figures like Nancy Pelosi, whose husband is a venture capitalist. Although the study doesn’t isolate her trades, it does run tests excluding top traders and even the highest-return lawmakers—and leadership still significantly outperforms, sometimes even more so. The 2012 STOCK Act reduced how often members trade, but it didn’t meaningfully change leaders’ average trade size or their above-market returns.

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Small-Caps Break Out as Fundamentals Improve The aftershocks of Fed Chair Jerome Powell’s hint at a September rate cut were still felt after Jackson Hole, with U.S. small-caps among the biggest winners. The Russell 2000 surged nearly 4% on Friday, finally breaking free from a long stretch of stagnation versus the S&P 500. RBC Capital Markets strategist Lori Calvasina said the move was important not just for its size but for signaling a potential shift in market leadership away from the Magnificent Seven. While she warned the rally could fade as a short-covering bounce, investor positioning suggests it may have more room to run. Valuations will be key. The Russell 2000 was trading at 16.3 times earnings before Powell’s speech, with levels at 17.5, 18, and 20 marking potential ceilings if momentum continues. Keith Lerner of Truist Wealth upgraded small-caps to “neutral,” noting that, unlike in past rallies, price action now comes with improving earnings trends. He also highlighted new tax provisions that support leveraged and capital-intensive companies. Still, lasting gains depend on economic strength. Nancy Lazar of Piper Sandler argues the U.S. is only beginning to feel the effects of last year’s rate cuts, and combined with a supportive policy mix of tax relief and deregulation, growth could reaccelerate to as much as 3% by 2026.

Savouri Warns: The Dollar Is Headed for a Wile E. Coyote Moment The U.S. economy is barreling toward stagflation, and the dollar is about to take a dramatic fall — that’s the stark warning from Savvas Savouri, chief economist and managing director at London-based advisory firm QuantMetriks. “If you look through the front windshield instead of the rearview mirror,” Savouri says, “it’s clear stagflation is on the horizon.” With a career that spans academia, investment banking, and his role as a long-time economist at Tosca Capital, Savouri has developed a reputation for sharp economic commentary. His current outlook is no exception: rising inflation, a weakening dollar, and a steepening U.S. Treasury yield curve. What’s Driving U.S. Inflation? According to Savouri, inflationary pressure is building on three fronts: He argues that recent tariffs — and Trump’s broader economic agenda, including reshoring and new fiscal spending — are contributing to inflationary momentum. He even refers to a recent legislative package, the “One Big Beautiful Bill Act,” as a form of money-printing. Powell’s Position in Jeopardy? In a note titled “The Inflationator vs. The Powell,” Savouri speculates that Jerome Powell might not remain Federal Reserve chair until his scheduled 2026 exit. Drawing parallels with Japan’s and Turkey’s former central bankers — ousted after resisting political pressure — Savouri suggests Powell may face similar risks if he doesn’t align with the White House. He warns that if inflation rises while the Fed cuts rates, the U.S. yield curve will steepen further — with long-term yields climbing faster than short-term ones — signaling trouble for the bond market. Dollar Drop Incoming Savouri sees the dollar on the edge of what he calls a “Wile E. Coyote moment” — seemingly suspended in midair before crashing. He believes this dollar decline could align with Trump’s goals and speculates that a meeting with China’s President Xi could result in a deal to let the renminbi appreciate, potentially removing its peg to the Hong Kong dollar. This could, in theory, improve U.S. export competitiveness — but also destabilize the dollar further. “Who’s going to buy long-term U.S. debt,” Savouri asks, “when a trade war is underway with traditional buyers?” How Investors Should Prepare To guard against rising inflation and a weakening dollar, Savouri advises buying TIPS (Treasury Inflation-Protected Securities), which adjust interest payments in line with inflation. He also believes inflation could benefit select equities — particularly large-cap or tech firms with strong balance sheets and international earnings that can withstand higher rates and pass on increased costs. On the other hand, smaller U.S.-focused companies, especially those loaded with short-term debt, may struggle in a high-rate environment. As for hedges, Savouri rejects cryptocurrencies, calling them a systemic risk to the U.S. financial system. Instead, he favors gold as a traditional hedge and is bullish on the Australian dollar, citing the country’s strong demographics and economic resilience.