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1 year ago

What Happens if Republicans Lose Control of Congress?


Among the most common questions we’ve received in the past few months are: What happens to stocks if Republicans lose control of Congress? And what happens if they retain control of both the House and the Senate?

According to Washington insiders, there is a more likely chance of the House flipping than the Senate, based on polling data. Considering that since the Civil War, the party that controls the White House has lost House seats in 35 out of 38 midterm elections, this is indeed a strong pattern. Should that happen, it could be good for stocks, as historically the best scenario under a Republican president is a split Congress.

“Markets tend to perform quite well under a gridlock scenario, but stocks have obviously done quite well since 2017 with Republicans in control of Congress,” explained LPL Research Chief Investment Strategist John Lynch. “Even more importantly than how Washington is divided up, though, is to remember that robust corporate profits and solid economic fundamentals drive long-term gains, and those are still quite positive.”

As our LPL Chart of the Day shows, a Democratic president and Republican-controlled Congress has historically been the best combination for the S&P 500 Index, followed closely by a Democratic president and split Congress. Next up, though, is a Republican president and split Congress (which appears to be a reasonable prediction for this November).

Stock Market Performance Under a Unified or Split Washington

For more on what midterms could mean for stocks, be sure to read Midterm Mayhem?


*Please note: The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of predecessor index, the S&P 90.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured. These products are not Bank/Credit Union obligations and are not endorsed, recommended, or guaranteed by any bank/credit union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.


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2 years ago

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