Swings in U.S. stocks have shrunk to the lowest level in six years, an indicator that has most often coincided with incumbent parties keeping the presidency in data going back to 1900.
The Dow has gained or lost 0.54 percent a day on average this year, the smallest fluctuations for an election year since George W. Bush defeated John Kerry in 2004, according to data compiled by Bloomberg. Daily changes have trailed the 112-year average of 0.75 percent in 13 of 17 instances when incumbents won, compared with six of 11 times the parties lost.
While volatility doesn’t predict winners, its decline shows less concern that prices will be whipsawed by economic news, a potential benefit for Obama. At the same time, the Dow’s 65 percent rally since he took office never pushed it above the record 14,164.53 reached in October 2007. No Democrat since World War II has held on to the White House with the Dow this far from its peak.
“The incumbent tends to get re-elected when the market is doing well,” James McDonald, chief investment strategist at Northern Trust Corp. in Chicago, said in a telephone interview. His firm manages $750 billion. “If the market has done well, that means the economy is doing well, that means the incumbent has a better chance.”