If you think politicians in Washington are ineffective and create uncertainty, you are not alone. This is reconfirmed with polls showing the approval rating of Congress at all time lows. Eric Singer, portfolio manager and founder of Congressional Effect Fund (CEFFX), takes it a step further. He contends that legislative bungling is so bad that the stock market will sink when legislators report to work and increase when they are on recess. Singer’s logic is that politicians create uncertainty and uncertainty creates market downturns. Singer places the fund’s money in cash when lawmakers are in session, and uses futures contracts and exchange-traded funds to replicate the S&P 500 when they are on recess.
Since the fund’s inception in 2008, it has significantly outperformed the S&P 500. However, this may have to do more with keeping money in cash during a difficult time in the stock market than the fund’s strategy. Although investing in this gimmicky fund may make you feel better if you are dissatisfied with Congress, a diversified portfolio allocation along with a letter to your local representative may be more prudent advice.
