A unified Democratic government has had the strongest average return of the four groups, though it is based on just eight midterm elections, spanning the Wilson to Carter administrations.
Divided government under a Democratic president has resulted from nine midterm elections dating back to the 1880s, and the market has been positive in the 12 months following eight of them.
Divided government under a Republican president followed 14 midterm elections — the most of the four outcomes — and the market was positive 93% of the time in the 12 months after those contests.
Unified Republican government is the one arrangement that averaged a negative return in the 12 months after a midterm election. The sample is the smallest, however, and three of the seven years immediately after a midterm election resulting in that arrangement, including 1902, 1906, and 1930, were the lead-up to financial panics that had little to do with which party held Congress.
Stock market returns by the size of the president’s party’s congressional losses
How many seats the president’s party loses in the House or Senate in a midterm election has shown little relationship to market movements afterward.