What Stocks Have Done Under a Republican President and a Democratic Congress

A Republican president facing a Democratic Congress could produce modest average equity returns, while the presidential cycle and selective sector opportunities offer stronger support for stocks.

• Since 1950, the S&P 500 gained an average of 4.8% annually under a Republican president and Democratic Congress, the weakest of six political combinations. The median return was 6.2% after excluding severe shocks in 1973, 1974 and 2008.
• The S&P 500 has risen in 17 of 19 third years of presidential terms since 1950, with an average gain of 17.3%. Under the same political composition, all seven observed third years produced gains averaging 16.1%.
• Historical sector data for the five comparable years from 1990 to 1992 and 2007 to 2008 favored consumer staples, up 9.6% on average, and healthcare, up 5.4%. Financials fell 7.7% on average, while the small sample and strong 2026 gains of about 18% for staples and 21% for healthcare argue for selectivity.
• Local opposition to data centers is spreading. Of 45 ballot measures across 10 states, 33 had passed and six were projected to pass, while all 20 Ohio contests backed restrictions. The Magnificent Seven were expected to post 22.6% third-quarter earnings growth versus 32.6% for the other 493 S&P 500 companies.
• Defense spending increased from $900 billion in fiscal 2024 to $1 trillion in fiscal 2026, with the White House seeking $1.5 trillion for 2027. Lockheed Martin fell 6.5% and L3Harris nearly 8% after the election, while the S&P 500 Aerospace & Defense Index gained 30.2% in 2007.

Takeaway: Investors should rebalance concentrated positions, favor selective exposure to healthcare, staples and defense, and retain the author's recommended 10% gold allocation, while monitoring funding deadlines, the debt ceiling and tariff policy.