Keith Fitz-Gerald

Political Gridlock Can Lead to Gains

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Believe it or not, legislative gridlock translates into higher profits for investors.

How is that possible?

For as frustrating as political contentiousness can be for lawmakers and voters alike, the data suggests that politicians' inability to act might actually be good for the markets.

We realize that this theory runs contrary to the conventional wisdom on the subject but, as I often like to point out, sacred cows frequently make the best burgers.

Our proprietary research suggests that markets tend to run in long cycles averaging 17 to 21 years in length, while the White House political cycle runs in eight-year increments -- at best. This means the political cycle is considerably shorter than dominant market cycles.

Our takeaway: In the long run, there's really no correlation between who occupies the White House and successful long-term investing because the political and market cycles are rarely in sync over such disparate periods.

Are the results any different in the short run?

Nope.

Here, too, the data suggests that it doesn't really matter which political party is in control, as the stock market's highest performance (a 9.6% growth per annum) occurs when there's the most political turmoil ...