What happens when Republicans control it all...
Stocks soar when Republicans control it all
November 10, 2016 - Starting in 2017, the Republican Party will hold the big trifectaā¦
Stocks soar when Republicans control it all
November 10, 2016 - Starting in 2017, the Republican Party will hold the big trifectaā¦
The Republicans will control the Senate, the House of Representatives, and the Presidency. This is an incredibly unusual eventā¦ It has only happened twice going back to 1950. (Once for two years, and once for four years.) So what does it mean for the markets? I didnāt know. So I crunched the numbers to find out. The answer was shockingā¦
The conventional wisdom is that āa house dividedā works out best for the stock market. The general thinking is that āgridlock in Washington is good.ā If different parties have ācontrolā over Congress and the Presidency, then not much gets done. In theory, thatās good for Wall Street ā fewer laws are passed to regulate businesses. I get it. But the numbers tell a different storyā¦
Surprisingly, the ātrifectaā trumps āthe conventional wisdom.ā Here are the actual stock market returns when Republicans controlled the Presidency, the Senate, and the Houseā¦
These returns are extremely high. Thatās a 14% compound annual gain! (And these are only price returns ā they donāt include dividends.) Itās not just Republicansā¦
When the Democrats control all three, stock prices perform better than when there is no trifecta. A Democratic trifecta beats ābuy and hold.ā And it beats the conventional wisdom that bipartisan control is good for stocks. Stock returns in a Democratic trifecta arenāt nearly as high as they are in a Republican trifecta, based on historyā¦ But keep in mind, weāre dealing with a small number of occurrences for the Republicans. So how does this affect us today?
Investors are now filled with fear and panicā¦ Whatās going to happen? Whatās Donald Trump going to do as president? The message from history is this: Donāt worry so much about it. The bigger story is the Republican trifecta. Stocks have performed incredibly well under a Republican trifecta. The last time around (from 2003 to 2006), stocks didnāt have a single losing year. In five out of the six years that weāve seen a Republican trifecta, stocks have only lost money once (in 1953).
Todayās headlines are all about Trump. But the bigger story is about the Republican trifecta. Using history as our guide, you donāt need to worry so muchā¦
Good investing
Sjuggerud: Stocks soar when Republicans control it all