The November 8, 2006 edition of Standard & Poor's, The Outlook ($) newsletter contained an analysis of the impact on the equity markets based on which party or parties controlled Congress.
Sam Stovall, S&P Chief Investment Strategist, notes, "...Next year marks the third year of President Bush’s second term in office. Historically, stock prices have posted their best performances in the third year of the presidential cycle, rising an average of 18% since 1945 vs. an average of 9% for all four years. What’s more, third-year advances have been very consistent, as the S&P 500 climbed 93% of the time (the market was flat in 1947). The last time the “500” declined in the third year was 1939. The fourth year’s 8.6% average increase is second highest..."
Standard & Poor's, The Outlook, November 8, 2006 "...The S&P 500 posted better returns (and frequency of advance) during periods of political unity, but surprisingly strong results under the total gridlock scenario. The periods of partial gridlock, which were relatively rare, saw the weakest market returns on average..."
The analysis concludes, "...Since the stock market has performed well during periods of both political unity and total gridlock, the conclusion we draw is that either Wall Street doesn’t care who is running the government, instead focusing more on the Fed and fundamentals, or it dislikes disunity and would prefer to see a unified Congress — regardless of the party."
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