US Republican control, was it better for stock and coin markets?...Cowen "Congressional combination is more important"

▲ Bitcoin (BTC), US/ChatGPT generated image

The US stock market and cryptocurrency market have responded more sensitively to the combination of power between the president and Congress than to whether a specific political party is in power. Notably, strong returns have been observed more frequently in divided government structures than in single-party control.

Cryptocurrency analyst Benjamin Cowen analyzed S&P 500 returns since 1953 based on the president's party affiliation and the control of the Senate and House of Representatives in a video uploaded to his YouTube channel on May 13 (local time). Cowen explained that while the stock market generally trended upwards over the long term regardless of who was in power, a clear difference emerged in detailed returns between single-party control and divided congressional structures.

According to Cowen's analysis, the average annual S&P 500 return when Democrats controlled the presidency, Senate, and House was 8%, with a median of 10.5%. When Republicans controlled all three branches, the average return was higher at 13.3%, with a median of 13.1%. However, Cowen pointed out that the average for full Republican control was heavily influenced by a single instance in 1954 when the S&P 500 rose by 45%.

The weakest combination was a Republican president and a Democratic Congress. In this configuration, the S&P 500's average return was 4.9%, and the median was 4%, the lowest among the analyzed scenarios. Cowen explained that market weakness was repeatedly observed with a Republican president and Democratic Congress, citing declines of over 38% during the George W. Bush administration in 2008, 30% during the Richard Nixon administration in 1974, and approximately 18% in 1973.

Conversely, a Democratic president with a divided Congress or a Republican Congress showed the strongest performance. The average return for a Democratic president with a divided Congress was 17%, with a median of 18.3%, and for a Democratic president with a Republican Congress, the average return was 16.2%, with a median of 19.7%. Cowen specifically noted that there were no negative annual S&P 500 returns over the past approximately 70 years under the combination of a Democratic president and a divided Congress.

For Bitcoin (BTC), Cowen explained that data is limited to after 2013, requiring cautious interpretation. Bitcoin recorded an average of -2% under full Democratic control and an average increase of 410% under full Republican control. However, a roughly 1,300% surge in 2017 significantly inflated the average, and by median, both full Democratic and Republican control showed weakness. Cowen's analysis indicated that Bitcoin showed better median returns in a divided congressional structure than under single-party control.

Cowen also stated that differences based on political configurations were observed in the dollar and gold. Since 1980, the dollar was weakest under full Republican control and strongest under a Democratic president and Republican Congress. Gold, conversely, performed best under full Republican control and worst under a Democratic president and Republican Congress. Cowen's conclusion emphasizes that when observing markets, it is more important to consider the congressional control structure in addition to just the president's party affiliation.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*