The midterm election is finally over, and though there are still several seats that are too close to call, the new balance of power in Washington has been set. Republicans decisively captured control of the House of Representatives, adding at least 60 seats and winning at least a 238-seat majority in the lower chamber. The GOP also won five new seats in the Senate, with several still up for grabs. And though Republicans did well in the Senate, they failed to wrestle control of the upper chamber away from Democrats.

I must admit my bias here and tell you that I am happy that there has been a veritable rejection of the Obama administration’s policies in what was indeed a Republican night to remember. The question we are all wondering about now is how President Obama will react to the new makeup of a divided Congress. In a press conference today at the White House, the president didn’t appear to me to understand that it was his policies that voters overwhelmingly rejected last night.

If the president fails to “get it” and continues sticking with his current policies, I think we could be in for a long haul economically. If, however, the president meets Republicans at least part of the way on issues like extending the Bush tax cuts, or not pushing forward on costly schemes such as cap-and-trade legislation, then I think we are likely to see the economy continue building on the slow progress we’ve made in recent months.

Now, it is well known that Wall Street likes gridlock, and I generally think a wrench in one-party rule is a great thing. However, it seems as though gridlock is actually not that great for the markets, at least historically speaking.

According to research conducted by Sam Stovall of Standard & Poor’s, during periods where the White House, Senate and House of Representatives were controlled by one party, the S&P 500 posted its strongest annual performances, gaining 7.6% since 1900, versus 6.8% for all years. Since WWII, the S&P 500 was up 10.7% under one-party rule, versus 8.4% for all years (hat tip to my friends at Minyanville for pointing out the Stovall research).

Stovall’s research under the so-called “Partial Gridlock,” where one party controlled Congress and another party controlled the White House, showed that the S&P 500 posted annual returns that were close to the average for all years, rising 6.8% in the 32 years that fit that situation since 1900 and 7.6% in the 30 years of partial-gridlock since 1945.

Under what Stovall calls the “Total Gridlock” scenario, or a split Congress such as what was voted in last night, the market performed the worst. Since 1900, the S&P 500 rose only 2% per year. Since 1945, the market gained only 3.5% per year.

Of course, this is mere statistical correlation, and it doesn’t mean that we are in for a subpar market performance going forward. But I think it’s important that we don’t consider the results of the midterm election to be a certain harbinger of good times ahead on Wall Street. In order to see another full-blown bull market, we are going to have to see the economy improve substantially. That means the return of jobs both here and globally, and a concerted effort on the part of governments to at least try to rein in spending and cut corporate and individual tax burdens.

Will this happen? I certainly hope so.