Investing.com — In a report released on Friday, Barclays (LON:) strategists delved into the historic impact of single Republican control of the U.S. government on stock markets.
According to the firm’s analysis, there have been only four instances since 1949 in which the GOP has held the presidency and majorities in the House and Senate. Despite the small sample size, those periods were reportedly more favorable for stocks compared to times when the White House was Republican but Congress was divided.
“We believe there is limited data to consider, with only 9 unique US election trifecta results since 1949,” notes Barclays. “Of these, 4 resulted in a unified Republican government.”
Barclays noted that during cases of unified GOP control, the experienced median return was approximately 750 basis points higher than when the Republican Party controlled only the White House, with a divided Congress.
Sectors that recorded particularly strong performance included cyclicals such as financials and technology, as well as commodity-related sectors.
Apart from sector performance, the study also examined the behavior of various market factors. Small-cap, high-volatility strategies have proven successful under a unified Republican government. On the other hand, strategies based on momentum and profitability factors showed lower mean returns in comparison.
Donald Trump’s Republican Party is projected to retain control of the House and Senate when he takes office in January, Edison Research said Wednesday.
This Republican majority, often referred to as a “red sweep,” is expected to give the Trump administration more freedom to implement its economic agenda.
Key priorities such as tax and tariff cuts could boost economic growth, but also raise concerns about inflation and the growing US budget deficit.
Anticipation of these policies contributed to gains in some areas of the stock market, strengthened the dollar and put pressure on Treasuries as investors adjusted their portfolios in favor of stronger growth, easing regulations and potential inflationary pressures that could limit the Fed’s ability to cut rates significantly next year.
While some of these market trends have slowed recently, investors remain focused on assessing the long-term impact of Trump’s policies on markets and the economy, particularly in a scenario where Republicans control both houses of Congress.
