Historically, the economy performs better under a split Congress

As Americans across the country woke up Wednesday morning, both sides of the aisle had something to celebrate, with Democrats taking control of the House and Republicans maintaining their hold on the Senate. But how will the economy, which has seen strong growth and jobs numbers in 2018, react under a divided Congress?

CBS News financial contributor Mellody Hobson looked at midterm elections going back to the 1940s and found that for the year following every single midterm, the stock market was up. She also said the data showed the economy tends to do better under a split Congress.

“We have that saying, past performance is not a guarantee of future results, but that is the data, and interestingly, the better performing periods are periods where the houses were split in terms of leadership,” Hobson said. 

According to exit polling, about two-thirds of midterm voters think the economy is “excellent” or “good” – the highest number in a midterm election since 1998. However, 49 percent also said their family’s financial position is “about the same” as it was two years ago. 

Hobson attributed that discrepancy to stagnant wages and the fact that President Trump’s tax cut largely affected corporate America, not individuals.

“I love that saying that Warren Buffett has that markets are stronger than governments. At the end of the day that’s what will rule the day,” Hobson said.

Some economists have warned that the ballooning deficit following the 2017 tax cut has injected the economy with a “sugar high” that may not last into 2019. Hobson doesn’t see any major “red flags,” but does worry about the Trump administration’s trade battles with countries like China, Canada and Mexico.

“There’s not a lot to get nervous about. I mean, it’s a stunning time economically…when you talk to individual companies and the CEOs, which I do a lot, they’re saying that their businesses are solid and so there are no giant red flags, I think the thing we have to worry about, the trade skirmish – I  won’t call it a war – what’s going on there and will the Democrats play into that as well,” Hobson said. 

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