Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

This photo provided by the New York Stock Exchange shows specialists Jay Woods, left, and Thomas McArdle on the trading floor, on Nov. 6. 2020.

Nicole Pereira/The Associated Press

There were many reasons to greet unclear U.S. election results this week with some trepidation, from fears of social unrest to concerns about the government’s response to the raging pandemic and weak economic recovery.

The stock market, though, was delighted: The S&P 500 rose 7.3 per cent this week, marking its best one-week performance since April – and a sharp reversal from the previous week, which was the worst since March.

“It’s directly related to the perception that gridlock won the election,” Ed Yardeni, president of Yardeni Research, said in an interview.

Story continues below advertisement

The key question now: How will this gridlock play out for investors over the next year or so?

Friday marked a slight setback. After big gains on Wednesday and Thursday, the S&P 500 ended the day down about one point, or flat in percentage terms.

The action was mixed outside the United States, too. Canada’s S&P/TSX Composite Index fell 15 points or 0.1 per cent on Friday, while British stocks were almost unchanged and Germany’s DAX index fell 0.7 per cent.

If you were devising an investing strategy based solely on historical numbers, though, you might find plenty of reasons to stick with a divided Washington, where neither party controls the White House, the House of Representatives and the Senate (but assuming that the presidential contest between Donald Trump and Joe Biden, unresolved on Friday, will conclude soon).

Yardeni Research looked at stock market returns during periods when Democrats and Republicans controlled the White House and both houses of Congress, and when Washington was divided.

For numbers going back to 1933, when Franklin D. Roosevelt won the presidency, the researchers found that divided periods generated the biggest gains for the S&P 500: 60-per-cent gains, on average, over periods that stretched as long as 12 years.

That beats the average gain of 56 per cent during periods of Democratic control and 35 per cent during relatively brief periods of Republican control.

Story continues below advertisement

Annual breakdowns aren’t as favourable for divided eras. But with an average annual gain of 9.5 per cent, years of division certainly don’t suggest that the current political environment is a reason to run from stocks.

“The alternative that was widely feared by investors was a blue wave, with the Democrats implementing lots of anti-business measures that would adversely affect corporate earnings,” Mr. Yardeni said.

Indeed, a number of observers noted this week that the election results offer a fine balance: They suggest that government will be able to reach an agreement on economic stimulus (even if the final aid package is smaller than what Mr. Biden had hoped for) but there won’t be sufficient political backing to raise corporate taxes.

Oh, and Mr. Trump’s mercurial approach to international relations and tariffs disappears from the national stage

Still, the market’s euphoric response to this week’s election papers over a number of simmering concerns – such as the pandemic, which has been sending U.S. daily infection numbers above 100,000 this week.

“This will likely lead more states to pause or reverse their reopening plans, compounding the detrimental influence on business and consumer confidence,” Michael Gregory, deputy chief economist at BMO Nesbitt Burns, said in a note.

Story continues below advertisement

As well, investors are discovering that a divided government can have a big impact on financial markets.

Just look at how government bond yields swung wildly. The yield on the 10-year U.S. Treasury bond climbed as high as 0.9 per cent this week in anticipation of a Democratic sweep (and big stimulus spending). The yield then slumped as low as 0.73 per cent – a notable move by bond standards – on the ambiguous results, weighing on bank stocks.

While a Democratic sweep looked good for underperforming stocks that stood to benefit from a massive stimulus package, that bet is now being challenged as investors rush back into technology stocks.

The tech-heavy Nasdaq Composite Index jumped 6.6 per cent over the past three days, outperforming U.S. dividend aristocrats (companies that have raised their dividends annually for at least 25 years) by more than five percentage points.

The winner of the U.S. presidential election wasn’t decided over the course of this week’s trading – but the stock market isn’t waiting around.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies