A 'blue wave' is historically better for the stock market than a 'red wave,' according to one Wall Street strategist

• Since the election of Franklin D Roosevelt in 1932, a Democratic "blue wave" election victory has always been better for the stock market than a Republican "red wave" sweep, according to research from Ed Yardeni.
• During the six previous Democratic administrations, the S&P 500 was up 56% on average, the strategist found.
• In comparison, during the three previous completely Republican administrations, the S&P 500 was up 35% on average.
• However, both parties are bested by a divided government, when stocks were up 60% on average.
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The stock market has historically performed better under a "blue wave" government administration as opposed to a "red wave" administration, according to research by market strategist Ed Yardeni.

In a note to clients Monday, Yardeni highlighted the historical performance of the S&P 500 since the 1932 election of Franklin D. Roosevelt. In the six following periods when Democrats controlled both chambers of Congress and the White House, the benchmark US equity index returned an average of 56%.

The best "blue wave" performance came from the FDR administration, with the S&P 500 netting a return of 113%, and the worst came during the Bill Clinton administration of the early 1990's when the index returned just 4.6%.

However, during periods of Republican control, something that's only happened three times since 1932, Yardeni found that the S&P 500 returned an average of 35%.

The best "red wave" performance came from the George W. Bush administration of 2001-2006, with the S&P 500 returning 58%. The worst "red wave" performance came from the Donald Trump administration of 2017-2018, with the S&P 500 returning 12.8%, Yardeni found.

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Still, according to Yardeni, there's one scenario when the market historically performed better than both a "blue wave" and "red wave" scenario: when the government was divided amongst both Republicans and Democrats.

On average, since the election of FDR, the S&P 500 returned an average of 60% when one party controlled either Congress or The White House, but not both.

"This suggests that gridlock is more bullish than the two unified alternatives, which are also bullish, but less so with Blue Waves more bullish than Red Waves," Yardeni said,

The common notion is that a gridlocked government prevents less meddling of the government in business affairs, which allows businesses to do what they do best: create jobs.

Or, according to Yardeni, could it be that who occupies the White House and Congress do not matter as much to the stock market as does the Fed?

"I think so," Yardeni concluded.