Markets Like Divided Governments

The markets tend to like a divided government. We are speaking purely from a market perspective, and not through a political lens.


What a crazy week, we could not have had a more eventful seven days. A large uncertainty is behind us and a relatively slow but orderly election (versus feared chaos or violence) and a likely split government led the market to charge up over +6% last week.


Through the narrow lens of the market we could not have had a better outcome. When you look at market performance under all different government alignments, a split, where one party holds a legislative body and a different one hold the executive, produces highest average market returns (~+15% per annum on average). In fact, a Democratic executive and a Republican legislature (we think Republicans are better at saying "No") has historically produced the highest average. Fewer and more middle of the road policy changes is often best for business. Fingers crossed that history repeats itself in that regard.

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