Only American citizens can vote in this year's elections, yet President Barack Obama is getting a bit of help from overseas.
Stock markets have recently rallied on news that beleaguered Spain might seek a bailout from its European neighbors, which would calm jittery bond markets and cheer investors who are worried about some kind of financial contagion in Europe. The uptick in stocks helped reverse a week of declines, sending our Obamanometer to its highest reading since it debuted in mid-September.
A few other things are going Obama's way, in addition to the feisty performance he turned in during the second presidential debate with Republican nominee Mitt Romney. Housing market data consistently shows that it's beginning to heal after six years of home-price declines. Gas prices, which had been heading toward $4 per gallon, have now begun to fall, a trend that could continue now that the move to cheaper winter blends is underway. And upbeat consumers have been spending more than economists expect, which could bring a meaningful boost to economic growth.
Still, the economy has been yo-yo-ing all year long, and every improvement in our Obamanometer so far has been short-lived. Inflation has been working against Obama, due to high energy and food prices, which should abate over the winter—but not before the elections on Nov. 6. Income growth remains weak, which suggests consumers are financing their spending by saving less, and perhaps borrowing more.
Corporate profits are slipping, which could send stocks downward in the days before the election. And some economists think that the fast-approaching "fiscal cliff"—a huge set of tax and spending decisions Congress must make by the end of the year—could shock businesses and consumers who aren't prepared for it. A tepid economy may be the best Obama can hope for before voters cast their ballots.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman
Methodology: The Obamanometer measures 22 economic metrics in 11 broad categories: the S&P 500 stock index, the price of gas, the employment situation, other job indicators, consumer confidence, leading economic indicators, inflation, housing, personal income, consumer spending, and the risk of recession as calculated by Moody's Analytics. The S&P 500 index and gas prices are updated daily, based on the level of change from one week prior. Other indicators are updated weekly or monthly as they come out. Changes are coded on a seven-point scale ranging from -3 to +3, with -3 representing a strongly negative economic development that favors Romney, and +3 indicating a strongly positive development that favors Obama. A score of 0 indicates no meaningful change. The individual scores are averaged each day on a weighted basis. The S&P 500 index, gas prices and the employment situation are weighted to represent one-half of the index value, since those are the most highly visible economic indicators. The other metrics represent the other half of the index value. Each day's overall Obamanometer reading ranges somewhere between -3 and +3. In visual terms, an overall reading of -3 would be represented by the needle pointing all the way to the left, while +3 would be represented by the needle pointing all the way to the right. If the overall reading were 0, the needle would point straight up.