Presidential Precedent: 2012's Electoral Sweet Spot

NEW YORK (TheStreet) -- With the 2012 U.S. presidential race in full swing, rhetoric is also heating up. Rhetoric aside (which is always heated in elections -- nothing unusual about that), election years are typically good for stocks. U.S. stocks have historically done well in election years, averaging 10.9% since 1928. Even better, this year we either re-elect a Democrat or elect a Republican, making it a sweet spot for stocks. Since 1928, the S&P 500 has risen 14.5% in election years when a Democrat is re-elected and 18.8% when a Republican takes the reins.

Can President Barack Obama win re-election? His approval ratings are low, but a Democratic incumbent has some advantages.

Who is the likely winner? Many view incumbent Barack Obama's chances as falling, since his approval rating is at 47%. Observers often remind us that no president has been re-elected with such a low approval rating. Yet the election is more than five months away, and ratings this early haven't proven predictive. Bill Clinton and Ronald Reagan handily won second terms despite hitting much lower approval ratings during their first terms -- 35% for Reagan and 37% for Clinton. Plus, popularity isn't a requirement for victory. Several presidents have won with less than 50% of the popular vote -- Kennedy, Truman, Nixon and Clinton did it, and George W. Bush won the election in 2000 but lost the popular vote.