Washington Control and the DJI

Last Thursday, election officials confirmed that Republicans will maintain control of the House, having already secured the Senate and the Oval Office. While some market bulls might be concerned about this shift from the current political setup (Democratic President, Democratic Senate, Republican House), history suggests room for optimism.

According to historical data, the Dow Jones Industrial Average (DJIA) has performed best under political conditions like the last two years. In the three sessions of Congress since 1901 that featured a Democratic President, a Democratic Senate, and a Republican House (including the 118th Congress), the DJIA gained an impressive average of 26.65%, or an annualized 12.47%. While three instances are a limited sample size, a perfect record of gains three out of three times is still noteworthy.

Looking forward, the outlook under a Republican trifecta appears promising, too. Over 14 sessions of Congress since 1901, with Republicans holding the presidency, Senate, and House, the DJIA averaged a solid gain of 18.39%, or an annualized 7.94%, with positive returns 11 out of 14 times. These results rank as the third-best average performance among various government control combinations.

So, while the idea that Wall Street thrives on political gridlock is widespread, the data shows that GOP unilateral control has also historically delivered respectable market performance.