There are often times that we hear how split government is good for the markets. You can read a recent New York Times piece that states “The benchmark S&P has climbed 17.5 percent in those years [since 1950] versus an overall average annual return of 12.3 percent.” That is certainly a good return compared to the average, and where things look like they’ll be this cycle, but will it yield the same results this time around?
Note: this is not an endorsement of either party, and certainly not aiming towards supporting a Democratic President and Republican Congress or the opposite.
One thing that is hard to quantify, is the difference in politics today from 72 years ago. While having split government used to moderate policies, that certainly is less true today, with it meaning gridlock and nothing getting accomplished. Will nothing getting accomplished be good? It could be if you don’t want one party’s advance of legislation.
There are many factors at play, and if we do end up with a split government, time will tell if the returns will be on par with the 17.5% average, or different.