Is gridlock really good for investors? The US electorate has delivered an unambiguous rebuke to President Barack Obama. This will almost certainly thwart any ambitions to extend the reach of the federal government over the next two years. But a widespread meme goes further. Mr Market is supposed to like both the Republican limited-government agenda, and US political gridlock in general. Neither claim stands up to rigorous examination.

On recent form, Mr Market is not a flame-breathing Tea Partier. Rather, his only interest in limited government is being left free of hostile regulation. He loves federal largesse, as long as it is thrown his way. At the peak of the crisis, stock markets responded to the Congressional vote against the troubled asset relief programme – government money to help the banks and the focus of Tea Party rage – with the biggest sell-off since the Black Monday crash. Stocks started their year-long rampage in March 2009, when the Obama administration made clear it was wimping out of drastic bank reforms and would instead rely on a flood of cheap money from the Federal Reserve (an organisation that is anathema to Tea Partiers).

As for the “Mr Market loves gridlock” mantra, historical data can tell you anything if you torture it enough. US stocks have undeniably done well in the third year of a presidency. But gridlock does not have a statistically significant correlation with superior market returns, as the chart shows.