The Stock Market Crushing Elephant
The election went the best way imaginable for Republicans.
I don’t even think Donald Trump expected it to go this well — I know I didn’t.
Not only did Mr. Trump get a sweeping victory, but the Republican Party also took control of the House of Representatives and the Senate for the first time since the 2004 election.
Republicans now have enough political clout to pass almost whatever they want — and I expect that is exactly what they will do.
With America now under complete Republican control, I decided to look back and see how the stock market performed when one party had control of the White House and both chambers of Congress — and I made a rather shocking discovery…
As it turns out, since 1901, the two parties have generated identical stock market returns when their respective party controlled both the White House and Congress — up 8% per year on average based on the Dow Jones Industrial Average.
The return is slightly below the long-run average annual gain of roughly 10%.
Even the percent return for each two-year period (two years to factor in midterm elections for the House and Senate) of control was exactly 66.66% for both Republicans and Democrats.
On the surface, there appear to be no disparaging returns where the stock market is concerned and nothing to get really excited about.
However, upon reviewing the details, a remarkable development stood out: Since 1901, America’s worst economic times followed Republican control.
The Elephant in the Room
Republicans have only controlled the White House, the House of Representatives and the Senate for three periods since 1901. By comparison, Democrats have held that same control 16 times.
In each of those three periods of Republican control, America faced a crisis. Just look at the charts below. The red shaded areas represent times when Republicans controlled the presidency, the House of Representatives and the Senate.
The period between 1901 and 1910 marks the first era of Republican control of the U.S. government. This period ended with the economic Panic of 1910-1911, but it also included the Panic of 1907 and the recession of 1902-1904 — a volatile time for the stock market, to say the least.
Republicans next attained control from 1921 through 1930. This era covers the roaring ’20s, a period where the economy and stock markets were booming, but it ended with a thud in August of 1929 with the Great Depression.
More recently, from 2003 through the end of 2006, Republican control of the presidency and Congress was followed by the Great Recession in late 2007 — an event that happened during George W. Bush’s presidency.
Once again, Republicans were in complete control leading up to the worst modern recession.
Looking at the data, one thing is for certain: Republican control of the White House and both chambers of Congress has ended badly every single time. Furthermore, Trump’s campaign platform of protectionist policies could end the same way.
On the bright side, for the two years heading into the 2018 midterm elections, 8% is the average stock market gain you can expect.
But with Trump at the helm, this may not be your typical scenario. And we know what has always followed Republican control — a dire economic environment.
Editor, Automatic Profits Alert