The government is on the verge of being divided – Democrats are projected to take control of the House and Republicans are keeping control of the Senate.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Is gridlock in Washington, D.C., good or bad for the stock market? The answer is complicated and depends whether you’re a short-term or long-term investor.” data-reactid=”16″>Is gridlock in Washington, D.C., good or bad for the stock market? The answer is complicated and depends whether you’re a short-term or long-term investor.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="First, historical data suggests a unified government is better for the stock market.” data-reactid=”17″>First, historical data suggests a unified government is better for the stock market.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="During the third and fourth years of a presidential term — going back to 1935 — the S&P 500 (^GSPC) rose an average of roughly 18% annually when the government is controlled by Democrats or Republicans. That eclipses the 13% return under a divided government, according to analysis from BMO Capital Markets.” data-reactid=”18″>During the third and fourth years of a presidential term — going back to 1935 — the S&P 500 (^GSPC) rose an average of roughly 18% annually when the government is controlled by Democrats or Republicans. That eclipses the 13% return under a divided government, according to analysis from BMO Capital Markets.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="In today’s markets, however, some gridlock in Washington isn’t a bad thing for stocks, according to Kristina Hooper, chief global market strategist at Invesco.” data-reactid=”19″>In today’s markets, however, some gridlock in Washington isn’t a bad thing for stocks, according to Kristina Hooper, chief global market strategist at Invesco.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“The market gave us a nice pop in 2017 and that was largely in anticipation of tax reform, but 2018 has been a different environment because tariffs have weighed on stocks,” she told Yahoo Finance. This year’s agenda, she said, has been “far less supportive of growth.” ” data-reactid=”20″>“The market gave us a nice pop in 2017 and that was largely in anticipation of tax reform, but 2018 has been a different environment because tariffs have weighed on stocks,” she told Yahoo Finance. This year’s agenda, she said, has been “far less supportive of growth.” 

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="” data-reactid=”21″>

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="President Donald Trump’s hawkish trade policies could be toned down with Democrats in control of the House of Representatives, which would create a divided government, Hooper pointed out.” data-reactid=”30″>President Donald Trump’s hawkish trade policies could be toned down with Democrats in control of the House of Representatives, which would create a divided government, Hooper pointed out.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="While the President has the power to impose tariffs, that privilege was initially given to Congress. Following the Smoot-Hawley tariffs of 1930, President Roosevelt convinced Congress to grant more tariff powers to the President, Hooper explained.” data-reactid=”31″>While the President has the power to impose tariffs, that privilege was initially given to Congress. Following the Smoot-Hawley tariffs of 1930, President Roosevelt convinced Congress to grant more tariff powers to the President, Hooper explained.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“There is the potential that you could see a Democratic House work with a Republican Senate to introduce legislation that claws back the president’s power over tariffs, since many Senate Republicans are in support of free-trade,” she said.” data-reactid=”32″>“There is the potential that you could see a Democratic House work with a Republican Senate to introduce legislation that claws back the president’s power over tariffs, since many Senate Republicans are in support of free-trade,” she said.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="While Hooper acknowledges that such a legislation would likely be vetoed by the president, the notion of Congress taking a stronger stance on trade could “moderate the [Trump] administration’s trade policy.”” data-reactid=”33″>While Hooper acknowledges that such a legislation would likely be vetoed by the president, the notion of Congress taking a stronger stance on trade could “moderate the [Trump] administration’s trade policy.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Worries about a trade war with China have kept a lid on the broader stock market so far in 2018, with the S&P 500 up only 3%.” data-reactid=”34″>Worries about a trade war with China have kept a lid on the broader stock market so far in 2018, with the S&P 500 up only 3%.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Still, regardless of Washington uncertainty, Hooper suggests taking advantage of any upcoming volatility and notes that October’s stock sell-off has made valuations more attractive.” data-reactid=”35″>Still, regardless of Washington uncertainty, Hooper suggests taking advantage of any upcoming volatility and notes that October’s stock sell-off has made valuations more attractive.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm. Follow Yahoo Finance on TwitterFacebookInstagramFlipboardLinkedIn, and reddit.” data-reactid=”36″>Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm. Follow Yahoo Finance on TwitterFacebookInstagramFlipboardLinkedIn, and reddit.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="More from Scott:” data-reactid=”37″>More from Scott:

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="These 2 forces could prompt companies to cut capital expenditures ” data-reactid=”38″>These 2 forces could prompt companies to cut capital expenditures 

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Mike Mayo warns of a capitalism ‘civil war’ if Congress passes this bill” data-reactid=”39″>Mike Mayo warns of a capitalism ‘civil war’ if Congress passes this bill

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="How the S&P 500 could roar to 3,000 by year-end” data-reactid=”40″>How the S&P 500 could roar to 3,000 by year-end

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