1. The good: both US inflation gauge and the change in the unemployment rate will work to President's advantage.
Source: Barclays Capital |
2. The bad: consumer sentiment (University of Michigan expectations) and the level of unemployment rate puts Mr. Obama with the losing group of incumbents.
3. The ugly: the average GDP growth makes the past period truly stand out.
Clearly this and other indicators are not necessarily the result of who was in the White House in the past four years (though there is some lively debate about that). But what this tells us is that there is a significant relationship between economic conditions and the incumbent's ability to win the second term. That's why there is a correlation between the equity markets and Obama's odds on Intrade for example. The state of the economy in the next few months will likely decide the next US president.
Barclays Capital: - Weak GDP growth and high unemployment pose significant headwinds to the current incumbent. To overcome them, history suggests that unemployment would need to keep trending down and sentiment would need to strengthen prior to the election.