Has Wall Street rise improved Obama's stock?

Posted: September 07, 2012

NEW YORK - The last time the stock market was this high, the Great Recession had just started, and stocks were pointed toward a headlong descent.

But on Thursday, the Dow Jones industrial average hit its highest mark since December 2007, and the Standard & Poor's 500 index soared to its highest level since January 2008 in a rally that seemed destined to mark a milestone: American stocks have come almost all the way back.

A long-anticipated plan to support struggling countries in the European Union provided the necessary jolt, and the gains were extraordinarily broad. All but 13 stocks in the S&P index were up. European markets surged, too.

So could the rally help President Obama? A number of recent studies have connected a rising stock market to improved odds of re-election for the incumbent president. Since 1900, when the S&P 500 has posted gains from July to October in an election year, voters have returned the sitting president to the White House 80 percent of the time, according to a study by S&P Capital IQ.

But no modern president has faced re-election when unemployment was so high. President Jimmy Carter was bounced from office in 1980 when unemployment was 7.5 percent.

If you started off 2008 by putting $10,000 in the S&P 500, the benchmark for most stock funds, you would now have $10,600, thanks to dividends. That's assuming you could stomach the ride. Your initial investment fell to $9,840 six months later, then plunged to $6,300 by the following January.

Thursday's rally got momentum after the president of the European Central Bank unveiled a new program to buy government bonds from the region's struggling countries with the aim of lowering their borrowing costs. ECB President Mario Draghi said the program will have no set limit on how much it can buy.

That was just what investors needed to hear. The S&P 500 index jumped 28.68 points to 1,432.12. The Dow Jones industrial average surged 244.52 points to 13,292.

The Nasdaq composite index also reached a milestone, gaining 66.54 points to close at 3,135.81, its highest level in 12 years.

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