Markets have historically shown stronger returns under divided government rather than during periods of complete political dominance, according to analyst Benjamin Cowen. In a recent analysis, Cowen examined the performance of the S&P 500, Bitcoin, and gold across different U.S. political power structures, drawing some intriguing conclusions.
Cowen highlighted that Bitcoin tends to perform poorly when there is a full political party sweep, whether under Democratic or Republican rule. He pointed out that both levels of control correlate with weaker median returns, notwithstanding standout years like 2017 that saw significant gains. His analysis indicated that Bitcoin’s best median performance has typically occurred under divided governments, suggesting that markets may benefit from political gridlock and reduced policy uncertainty.
Specifically, he noted that during periods of Republican control, Bitcoin surged by an average of 410%, while the Democratic administration has seen an average return of -2%, attributing this downturn to a notable slump during President Biden’s tenure. So far this year, Bitcoin has experienced a decline of about 7%, contrasting sharply with the historical midterm-year averages of +65%. This trend raises concerns about potential volatility or a deeper market reset if macroeconomic conditions worsen.
Looking ahead, Cowen expressed optimism that markets generally exhibit upward trends over the long term, regardless of political party control. He observed that the S&P 500 has continued to rise through various shifts in political leadership over the decades, regardless of changes in presidential administrations, congressional control, or economic cycles.
Cowen also speculated that a split Congress in 2027 could be bullish for Bitcoin, drawing on historical patterns, although he acknowledged that the dataset remains limited due to Bitcoin’s relatively short trading history. He stressed that long-term market structure and liquidity conditions may have a more profound impact than short-term political narratives.
As this analysis unfolds, market participants are encouraged to stay informed and adapt their strategies accordingly.
