S&P’s Sam Stovall: Gridlock in Congress Harms, Not Helps, Stocks

Since 1900, when Congress is split, the S&P 500 has risen 3.2% per year, versus 7.7% under a unified government scenario, Stovall writes. “The rationale behind this sub-par performance could be that gridlock generates uncertainty–as Congress impedes, rather than leads–and Wall Street hates uncertainty.”

Under the heading “Market Mayhem,” Stovall writes that as a result of the debt ceiling impasse, global sector performances are mostly in the red this month. Across the board, in the S&P Global 1200, S&P 500, S&P MidCap 400, or S&P SmallCap 600 Indices, declines have been seen in the Consumer Discretionary, Financials, Health Care, Industrials, Materials, Telecom Services and Utilities Sectors, with five of the 40 sectors registering declines in excess of 6%.

“Washington grumbles, Wall Street stumbles,” Stovall concludes. “Once again, history repeats itself. We still believe in 11th hour miracles, and think recent share price declines will be quickly recovered when the debt debate concludes. What will take much longer to recover, in our opinion, is our confidence in our national leadership.”