Trevor Jennewine, The Motley Fool
4 min read
Midterm elections have historically been difficult for the political party in the White House, and this year was no different. Democrats won control of both chambers, flipping at least 42 House seats and seven Senate seats in a sweeping defeat for President Donald Trump’s Republican Party.
Wall Street was initially pleased. The S&P 500 (SNPINDEX:^GSPC) and Nasdaq Composite (NASDAQINDEX:^IXIC) added 1.6% and 1.4%, respectively, on the day following the election, as investors celebrated the congressional gridlock that will limit Trump’s ability to make major policy changes.
Missed AI’s “Act 1”? Act 2 Could Be 16x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
However, the indexes gave up those gains and more on Thursday, Nov. 5, due to concerns that a Democratic-controlled Congress could bring greater scrutiny to artificial intelligence infrastructure spending. Anxiety surrounding elevated oil prices, persistent inflation, and potential interest rate hikes added to the selling pressure.
Looking ahead, history says a worst-case scenario is about to unfold for the stock market.
Image source: Getty Images.
History says the stock market’s gains will be much smaller in the remaining years of Trump’s presidency
The S&P 500 has added 23% since President Trump returned to the White House for a second term in January 2025. That represents an annual return of 12.1%. But statistics suggest the benchmark index will deliver much worse returns throughout the remaining years of Trump’s presidency.
There are six possible combinations of presidential party affiliation and congressional control. A Republican president could serve alongside a Republican-controlled Congress, a Democratic-controlled Congress, or a divided Congress. The same three possibilities exist under a Democratic president.
Of those six possibilities, the one produced by the latest midterm elections — a Republican president paired with a Democratic-controlled Congress — has historically been the worst combination for the S&P 500. The chart below provides details.
Data source: Carson Investment Research. The chart shows the S&P 500’s annual return under different combinations of presidential party affiliation and congressional control. Data was collected between 1951 and 2025.
