What Happens When One Party Has Control?

As I sit at my desk writing, we are awaiting the results from the last run-off election in Georgia to decide who will control the U.S. Senate.

If the Democrat candidate wins, we will have a unified government – meaning Democrats will control the Senate, House of Representatives, and Presidency.

If Republicans win, Congress will be split with Democrats controlling the House and Republicans controlling the Senate.

This led me to the question, historically what has happened to the stock market during these scenarios?

Unified Democrats in Control

From a market perspective, evidence would suggest it does not matter.

Pulling data from 1926 to 2019, both parties have returned nearly the same U.S. market returns with a unified government.

I was shocked to see this.

Unified Government

Split Congress

Ignoring who is president, LPL looked at U.S. market returns based on who’s in power going to back 1950s.

S&P market returns were:

Republican Controlled Congress; 13.4%

Democratic Controlled Congress: 10.7%

Split Controlled Congress: 17.2%

This suggests a split congress, is the most favorable stock market returns for investors.

The Future is Hard to Tell

In summary, my view it does not really matter who is in power. Companies will keep innovating and the economy will keep chugging along. Short-term volatility is to be expected during any election season. Ignore the noise.

Don’t base your investment decisions on who happens to be President (or in congress). Focus on the long-term and stick with your investment plan built around your specific risk tolerance and goals.

Thanks for reading!


Disclaimer:  This article is for informational purposes only and is not a recommendation of WealthU Advisors, Michael Uehlein. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. Therefore, it should not be assumed that future performance of any specific security, investment product, or investment strategy referenced in the article, either directly or indirectly, will be profitable or equal to the corresponding indicated performance level(s). No portion of the article shall be construed as a solicitation to buy or sell any specific security or investment product or to engage in any particular investment or financial planning strategy. Any reference to a market index is included for illustrative purposes only, as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio.