On Tuesday, U.S. stocks rallied as millions of Americans cast ballots to determine whether Republican John McCain or Democrat Barack Obama wins the presidency, with polls favoring the latter to replace George W. Bush in the White House.

As the economic uncertainty becomes clearer and the negative rhetoric is removed, investors became calmer sending the CBOE Volatility Index, the fear gauge tumbling down. The VIX fell 9.8% to 48.74, its lowest since early October.

The Dow Jones Industrial Average surged as much as 330 points, ending at 9,625.28, up 305.45 points, or 3.3%. The S&P 500 rose 39.44 points, or 4.1% to 1,005.74, for its first close above 1,000 since Oct. 13. The Nasdaq Composite added 53.79 points, or 3.1% to 1,780.12.

The simple notion that this Election Day marked a potential turning point for the economy and a departure from the current state of affairs was enough to boost investors’ spirits and send the stock market higher.

While there are no guarantees in elections or the economy, there was a sense that the election-time rally may have some legs as investors have tired of viewing bad news and were looking for any stimulus to start buying stocks again.

Tuesday’s hotly contested presidential race between Democrat Barack Obama and Republican John McCain seems to be providing the perfect catalyst for a stock market rally.

Markets have rallied 15% in the week prior to this election, a move that has surprised some observers. Front-runner Barack Obama’s higher tax policies combined with the near-certainty of Democratic control of Congress defies the conventional wisdom that markets like lower taxes and at least some gridlock on Capitol Hill.

Despite expectations of a second economic stimulus measure and government bailout money circulating through the financial industry, the economy still is likely to struggle under the weight of unemployment pressures and a weakened consumer.

“We must uphold the promise of Roosevelt, Truman, Kennedy, Johnson, Carter, and Clinton and never allow the President and his Republican friends to threaten Social Security by putting it on the Wall Street trading block” - John Kerry, US Democratic politician, Speech at Democratic Convention, May 31, 2002

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