TED JENKIN: Democrats took Congress. Don’t let your emotions make bad money moves

Democrats have taken control of the House and Senate. President Donald Trump remains in the White House.

Republicans are furious. Democrats are celebrating. And millions of Americans are staring at their retirement accounts wondering one thing: What the heck does this mean for my 401(k)?

Should you sell stocks? Buy gold? Move everything into cash? Before you make a move, you might want to look at what history actually tells us. Because this particular combination of political power has produced some surprising stock market results.

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The worst political combination for stocks?

According to research from RBC Wealth Management and Bloomberg, the S&P 500 has historically averaged just 4.9% annually when a Republican president faces a Democratic-controlled House and Senate.

That’s the lowest average among six political configurations studied from 1953 through 2025.

Compare that with the other combinations:

• Republican president, Republican Congress: 13.3%
• Republican president, split Congress: 7.3%
• Republican president, Democratic Congress: 4.9%
• Democratic president, Democratic Congress: 8.0%
• Democratic president, split Congress: 17.0%
• Democratic president, Republican Congress: 16.3%

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Those are historical annual price returns, excluding dividends, not predictions for 2027. But here’s what should catch your attention. Not all political gridlock has produced the same stock market results.

And anyone telling you Wall Street always loves divided government isn’t looking at the complete numbers.

But here’s the midterm surprise

Before you start selling everything in your retirement account, there’s another statistic you need to know. According to Capital Group, the S&P 500 has averaged a 15.4% gain in the 12 months following midterm elections since 1950.

Even more remarkable? Every post-midterm 12-month period in that study produced a positive return. That’s a pretty impressive historical batting average.

Why?

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One explanation is that markets dislike uncertainty. Before elections, investors worry about taxes, regulations, spending and which party will control Washington. Once the election is over, some of that uncertainty disappears.

Wall Street may not like the election results, but it often likes knowing the results.

Gridlock isn’t always good for your money

When Democrats control Congress and Trump controls the White House, passing major legislation generally becomes more difficult. Tax changes require negotiation. Spending bills can become political battlegrounds. Government shutdowns and debt-ceiling fights can create uncertainty.

Some investors welcome the reduced likelihood of sweeping policy changes. Others worry that Washington won’t be able to address serious fiscal challenges.

But remember something important: The stock market doesn’t rise or fall simply because politicians agree or disagree.

Corporate profits, inflation, interest rates and economic growth still drive long-term investment performance. And historical political averages don’t prove that congressional control caused those returns.

Four things I’d watch in 2027

First, corporate earnings. Companies making more money can support higher stock prices regardless of who’s running Congress.

Second, interest rates. Federal Reserve decisions and inflation could have a much bigger impact on your portfolio than congressional gridlock. Will see another two or three rate hikes if inflation stays stubborn?

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Third, taxes. Major changes to corporate, capital gains or individual income taxes would face significant political hurdles.

Fourth, government spending and debt. Budget battles could affect Treasury yields, borrowing costs and investor confidence. We are still more than $40 trillion in debt.

According to research from RBC Wealth Management and Bloomberg, the S&P 500 has historically averaged just 4.9% annually when a Republican president faces a Democratic-controlled House and Senate.

These are the issues that can actually affect your financial future.

Don’t let your politics destroy your portfolio

I’ve spent decades watching investors make one of the biggest mistakes in personal finance. They confuse political disappointment with investment strategy. They sell stocks because they dislike the president. They move into cash because they dislike Congress. Then they wait for an election result that makes them comfortable.

Meanwhile, the stock market keeps moving.

Here’s the reality: A 4.9% historical average doesn’t mean your portfolio will earn 4.9% in 2027. And a 15.4% post-midterm average doesn’t guarantee a rally.

History gives us perspective, not a crystal ball.

If you’re retiring next year, make sure your portfolio can handle volatility. If retirement is 20 years away, don’t let one election derail a long-term investment strategy. Because here’s the most important financial lesson from this election.

Your 401(k) doesn’t have a political affiliation. It doesn’t vote red or blue, it’s always voting green.

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And the fastest way to turn a political disappointment into a financial disaster is to let your emotions make your investment decisions. It’s the No. 1 reason investors don’t do well with their own money.

Vote with your convictions. Invest with your calculator.

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