Salient to Investors:

Swings in US stocks are at the lowest level in 6 years, an indicator that has most often coincided with incumbent parties keeping the presidency in data going back to 1900. Daily changes in the Dow have trailed the 112-year average of 0.75 percent in 13 of 17 instances when incumbents won, in 6 of 11 times when incumbents lost. Volatility doesn’t predict winners but its decline shows less concern that prices will be whipsawed by economic news.

James McDonald at Northern Trust said the incumbent tends to get re-elected when the market is doing well, meaning the economy is doing well.

On average since 1900, the Dow has gained 9.3 percent in years before incumbent parties retain office and fallen 4.5 percent when they lost.

Alan Gayle at RidgeWorth Capital Mgmt said stock volatility is a barometer for investor psychology.

Incumbent parties have lost all four elections when daily changes averaged 0.94 percent or more in since 1900.

David Goerz at Highmark Capital Mgmt said exceptions to indicators such as volatility make them statistically meaningless – just as much evidence suggests Obama will be defeated.

Philip Orlando at Federated Investors said gains in stocks this year reflect investor optimism that Romney will win, address the fiscal cliff, and adopt more pro-growth fiscal policies.

Deutsche Bank said closer presidential races generate bigger rallies after the victor is chosen, with the S&P 500 rallying an average of 5 percent by the end of the year when one candidate led by about 3 percent or less.

Wall Street strategists estimate the S&P 500 index will surpass its all-time high in 2013, as earnings expand 4.9 percent.

In 28 presidential races since 1900, the Dow has gained 17 times between election day and the end of the year, for a mean return is 1.6 percent.

Earnings have helped keep the S&P 500 trading at a 15 percent discount in 2012 to its five-decade average in 2012.

John Carey at Pioneer Investments says equities have been gaining as investors bet policies will remain in place, helping companies keep earnings expanding. Carey said the market favors the status quo and a continuation of the current situation so that it can focus on earnings and economic data.

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