How a Republican victory in Congress could impact the stock market, illustrated in a single graph.

In the 2024 election, Donald Trump, the former president, was victorious and took office with the backing of Republican candidates.

The Senate, previously under Democrat control, will now have a Republican majority, according to NBC News. While it is yet to be determined which party will control the House of Representatives, if Republicans maintain their hold, they will have the power to implement the agenda that Trump outlined during his campaign.

The president's impact on stock investors is minimal, as the S&P 500 has risen in 17 out of the past 20 four-year presidential terms.

But some investors may be eying the pending House races closely.

According to Ryan Detrick, chief market strategist at the Carson Group, it is not the individuals in the White House that primarily benefit investors, but rather the composition of Congress.

According to data from the Carson Group, the S&P 500 has averaged an annual return of 8% under single-party rule, compared to a 9.9% gain when different parties control both the presidency and at least one chamber of Congress from 1951 to 2023.

Under Democratic presidents, Congress tends to be divided, resulting in average yearly gains of 15.7% for investors. Similarly, under Republican presidents, a divided Congress also leads to average yearly gains of 13.7% for investors.

If the S&P 500 ends 2024 with a 25% increase from the previous year, it will signify 14 consecutive years of positive returns under split Congresses.

The economy drives stocks, not politics

According to Detrick, the reason why stocks tend to perform better under divided governments may be due to the belief that gridlock prevents legislators from implementing extreme measures that could negatively impact the economy.

""Our system has checks and balances to ensure there's no excessive power or spending on one side," he remarks."

The recent election's outcome has little impact on stock prices compared to the economic fundamentals that influence them, according to Detrick.

""Record earnings are leading to a pretty solid economy, with initial jobless claims at their lowest levels since May," he says."

A unified Congress could potentially take power and pass sweeping legislation that would disrupt the economy, Detrick says. However, it's important to focus on central banking policy for a better understanding of the economy's impact.

The Fed's decision to cut rates is more significant to investors than any actions taken by Congress," Detrick remarks. "Lower interest rates have a direct impact on the economy by making credit more accessible to consumers and businesses, and in this case, it's a response to the Fed's assessment that inflation is decreasing.

While policy can influence your portfolio, it is not the sole determinant of market outcomes.

"The reality is that the economy matters more," says Detrick.

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