Is Gridlock Good?

To assess the impact of elections on the market, it is helpful to know who occupies the White House, but also who controls Congress as well. This article goes back to the Eisenhower administration and classified each year as either a gridlock or non-gridlock year. It then computes the total rate of...

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Bibliographic Details
Published in:Journal of Financial Planning 2004-08, Vol.17 (8), p.20
Main Author: Riepe, Mark W
Format: Article
Language:English
Subjects:
Defense contracts
Effects
Election results
Elections
Energy industry
Expected returns
Mathematical models
Political parties
Presidents
Rates of return
Securities markets
Stock exchanges
Online Access:Get full text
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Summary:To assess the impact of elections on the market, it is helpful to know who occupies the White House, but also who controls Congress as well. This article goes back to the Eisenhower administration and classified each year as either a gridlock or non-gridlock year. It then computes the total rate of return on the S&P 500 Index during those years to see if there was any difference. Calendar years in which a single party controlled the legislative and executive branches had an average return to the overall market of 10.67%. This is lower than normal. The average return for the gridlock years was +14.08%. The problem is that this is dealing with a relatively small number of years and yearly stock market returns are incredibly volatile. The best that can be said is that there's a 52% chance the difference in return that is seen is real as opposed to being a random occurrence.
ISSN:1040-3981