AN INSTRUCTIVE VISUAL. The following figure, from King at SCSU Scholars, engages the assertion that the stock market is discounting an Obama presidency.


The more likely explanation:

If you just assume away the weekends, as I did above, it's more likely that the Dow leads the Obama contract than vice versa*.

Falling Dow is a leading indicator of a sour economy, the sour economy favors the party out of (executive) power.

*Uses Granger Causality test, two lags, for those who want the econometrics. EViews file available.

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