Historical data on U.S. equities show that periods with a Republican president and a Democratic-controlled Congress have produced highly variable outcomes for broad indices such as the S&P 500 (SPX) and Dow Jones Industrial Average. The configuration is relatively infrequent, so a few extreme episodes carry disproportionate weight in long-run averages.
The 1973-74 oil crisis occurred under this political mix and drove an approximately 48% peak-to-trough decline in the S&P 500 (SPX), pulling the average annual return for such periods toward roughly 4.9%. That drawdown reflected a severe exogenous shock rather than political gridlock alone.
Other instances under the same partisan structure have delivered very strong positive returns, including the mid-1980s bull phase and the 1989 calendar year, when the S&P 500 (SPX) produced about a 31-32% total return. In those cases, broad benchmarks such as the S&P 500 and Dow tracked powerful rallies despite the split government.
ETFs that mirror these indices, including SPDR S&P 500 ETF Trust (SPY), Vanguard S&P 500 ETF (VOO), iShares Core S&P 500 ETF (IVV) and SPDR Dow Jones Industrial Average ETF Trust (DIA), directly transmit any realized effect from this political configuration into tradable vehicles. Historical patterns indicate that macro shocks and broader market cycles have often mattered more than the simple party alignment when determining near-term equity performance.
References
- https://www.ebsco.com/research-starters/history/republicans-regain-control-congress
- https://www.nationalaffairs.com/public_interest/detail/the-permanent-democratic-congress
- https://matrixassetadvisors.com/wp-content/uploads/2024/04/Market-Returns-vs.-Political-Party-2024.04.pdf
- https://www.hartfordfunds.com/practice-management/client-conversations/managing-volatility/how-political-parties-in-power-influence-markets.html