Democrats have won control of both chambers of Congress, while Donald Trump remains president. The results have left some investors celebrating and others concerned—and many people are wondering what the shift could mean for their retirement savings.
Should you sell stocks, buy gold or move your investments into cash? Before making a decision, it may help to consider what past market performance can—and cannot—tell us.
Research from RBC Wealth Management and Bloomberg found that, from 1953 through 2025, the S&P 500 delivered an average annual price return of 4.9% when a Republican president faced a Democratic-controlled House and Senate. That was the lowest average among six combinations of party control examined. The figure excludes dividends, and it is not a forecast for 2027.
There’s another historical statistic worth considering. Capital Group found that the S&P 500 gained an average of 15.4% in the 12 months after midterm elections dating back to 1950. Each of those post-midterm periods in the study ended with a positive return.
One possible reason is that markets tend to dislike uncertainty. Before an election, investors may be weighing possible changes to taxes, regulations and government spending, as well as which party will control Congress. Once the results are known, at least some of that uncertainty fades. Markets may not welcome an outcome, but investors often prefer knowing what it is.
With Democrats controlling Congress and Trump in the White House, passing major legislation may prove more difficult. Tax changes could require compromise, while spending negotiations may become contentious. Shutdown threats and disputes over the debt ceiling could also unsettle markets.
Some investors may see gridlock as a barrier to sweeping policy changes. Others may worry that Washington will struggle to address long-term budget problems. Either way, political agreement—or disagreement—isn’t what determines market performance on its own.
Corporate earnings, inflation, interest rates and economic growth remain important drivers of long-term returns. Historical averages can offer perspective, but they don’t show that a particular balance of power caused the market’s performance.
Companies that increase their profits may support higher share prices regardless of who controls Congress. Federal Reserve decisions and inflation could have a larger effect on portfolios than political gridlock, especially if stubborn price increases lead to further rate hikes.
Tax policy is another factor. Major changes to corporate, capital-gains or personal income taxes may face significant political obstacles. Government spending and the national debt also matter: budget disputes can influence Treasury yields, borrowing costs and investor confidence. The federal debt has topped $40 trillion.
It’s easy to mistake political disappointment for an investment strategy. Some investors sell because they dislike the president or move into cash because they’re frustrated with Congress, then wait for an election result that makes them feel more comfortable. In the meantime, markets keep moving.
A historical average of 4.9% doesn’t mean portfolios will return that amount in 2027. And the 15.4% post-midterm average doesn’t promise another rally. History can provide context, not certainty.
If you’re nearing retirement, make sure your portfolio is prepared for volatility. If you’re decades away, one election result may not be a good reason to abandon a long-term plan. Your 401(k) has no political allegiance; its performance depends on the investments inside it and the decisions you make.
Letting emotions drive investment choices can turn political frustration into a costly financial mistake. Vote according to your beliefs, but make investment decisions with your goals and numbers in mind.
