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Divided Government

Divided Government

January 18, 2023
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As the new Congress begins its session, it's interesting to watch how the shifting balance of power in Washington, D.C. may impact your investment, tax, and estate strategies.

Although their numbers were not as high as expected, the Republicans won control of the House of Representatives. And the Democrats have a majority in the Senate.

We now have a divided government, and that may mean gridlock. As it becomes increasingly challenging to get things done, there may be little in the way of significant tax or spending programs coming out of Washington during the next two years.

However, this historical perspective may be of interest.

A Divided Congress Good for Stocks?

Historically, some of the best periods for the stock market were those during a divided Congress. In the 73 years since 1949, there have been 44 split governments. In each year after one of these elections, the S&P 500 posted positive average returns, regardless of which party controlled which branch. 1

Therefore, as you can see from the chart, gridlock may not be bad for investors. But remember, past performance does not guarantee future results. 2

As always, please don't hesitate to contact us if you have any questions or concerns about how the shifting political landscape may impact your finances.

 

1 Forbes—Divided Government and the Way Forward for the Markets

2 MFS.com—Midterm U.S. Election Preview: Gridlock Ahead? 

The S&P 500 Composite Index is an unmanaged index that is considered representative of the overall U.S. stock market. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.