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| The Election: Maybe It's the Economy After All? - Aug. 18, 2004 |
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Introduction
In normal times, economic considerations are the dominant force affecting national elections, particularly elections for President. But with the United States engaged in a war with terrorists, a war the terrorists began by attacking us on our own soil, you would think this clearly would trump the economy as the most important 2004 election issue. This just might turn out not to be the case, however.
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Foreword
We all know -- the knowledge usually having been acquired the hard way -- the downside of discussions involving sex, religion and politics. Sometimes, these are simply unavoidable, surely the case when it comes to discussing political matters within the context of economic and financial-market analysis and forecasts. So while I know the following is all but certain to get me into trouble with some readers, the discussion must be undertaken nevertheless!
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Onward
Were this year's Presidential election inordinately about terrorism, it is likely George Bush, right now, would have a commanding lead over John Kerry in the polls. This is not at all the case, although perhaps after the Republican Convention later this month, it will be.
I'll interject here my personal view that the Democratic Party did not put in place its strongest ticket. In fact, I think it is a weak ticket. When you look at the people vying for the Democratic nomination originally. I believe a ticket with Joe Lieberman at the top of it would have been a good deal more formidable.
At the moment, Kerry/Edwards may still be enjoying something of the traditional polling lift experienced in a post-convention environment, although their bounce was far below what was expected, based on historical norms. It is highly probable the Bush/Cheney ticket gets its bounce after the Republican convention concludes in early September. After that dust settles, data coming from the better polls become more relevant and as well as more important.
And terrorism, per se, could become an extraordinarily more significant influence on the election than it appears to be at present, depending on what Al-Qaeda is capable of doing here in the United States, as well as when it does do something, if the capability exists.
I believe, as I have for a long time, that something additional is going to occur domestically. I remain confused about the timing, however, since good cases can be made for either before the election or after it. But if something is planned and possible for after the election, I don't think it will be long after the election. When it comes, it will clobber the stock market.
But this missive and the ones it sets up are not about terrorism, they are about the economy and the stock market.
In the 1992 Presidential race, Clinton operative, James Carville, immortalized, "It's the economy, stupid!" And as I suggested earlier, while you would think that 9/11 would make this election less economy, more terrorism, maybe that will not be the outcome.
In coming days, I plan on examining four economically oriented items I think could influence November's election. Based on my analysis, none of the four are helpful to George Bush, which may help explain why Kerry/Edwards is still in the race. These items are: (1) gross domestic product, (2) energy, (3) employment, and (4) the stock market.
The first of these I'll have a look at is GDP. The reason: I've taken a quick look at last week's trade figures, and they could have a dramatic impact on the next GDP revision for the second quarter, due out 8/27.
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A Quick Comment on Stocks
Remember my recent missive posted on the website entitled, "Stocks: The August Options Expiration -- Agony or Ecstasy for Bulls?" Monday through today's stock-market performance provide the "agony"/"ecstasy" answer -- respective DJIA, S&P 500 and NASDAQ 100 gains of 258, 30, and 56 points, 2.6%, 2.8% and 4.3%.
But I strongly suspect an expiration-week rally is all that is taking place, one likely to run out of steam very soon. And as anomalistic as this may appear at first blush, the rally may actually be bad for Bush/Cheney. More on that in my upcoming series.
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