From a policy standpoint the market appears to say historically, gridlock is good, and with that 15.7% average annual return. That may also be favorable for investors.
The midterm elections are over. As expected, the Democrats took control of the House while the Republicans maintained control of the Senate. Expect legislative gridlock for the next two years but don’t assume that’s necessarily a bad thing for investments and the economy.
In this week’s podcast, LPL Research’s strategists discuss historical evidence and other factors that indicate the oft-heard mantra “gridlock is good” might be true when it comes to the stock market.
Since 1928, stocks have produced an annual average return of 12% in years when a Republican president held office and Democrats and Republicans split control of Congress. In the year following a midterm election with that split in the balance of power, returns have averaged more than 20% based on the S&P 500.
While the future is uncertain, LPL’s research strategists see signs that the economy and stock market could follow similar patterns following the midterm elections as in the past. Listen to the podcast to hear how LPL’s research strategists see potential post-midterm gridlock affecting the economy.
Midterm years tend to see the majority of stock gains late in the year. In fact, the average midterm year since 1950 has seen the S&P 500 actually negative year-to-date in the month of October before a nice end of year rally.
Midterms are over and we have a Republican president along with a split congress. Since 1950, this is actually the most bullish scenario for the S&P 500 under a Republican president.
For more insights, listen to the entire podcast. And make sure not to miss future podcasts by subscribing to LPL Market Signals on your favorite podcast platform.
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