Just a few days ago, our Obamanometer reading hit its highest level since we inaugurated the gauge in mid-September. But the needle has now tipped back a bit, due to the recent slide in the stock market.
Stocks peaked for the year on September 14, after the Federal Reserve announced its latest quantitative easing program. But they've been seesawing downward since then. Over the last week, stocks have fallen by nearly three percent, mainly because of disappointing corporate earnings for the third quarter. Analysts were expecting a modest slowdown, but weak numbers and a subdued outlook at big companies such as Microsoft, Google, McDonald's, DuPont and UPS have undermined hopes that the global economy might soon pick up steam. Ongoing worries about depressed European nations such as Spain, combined with the U.S. "fiscal cliff," haven't helped.
Obama still a few things going his way, however. Gas prices have dropped $.13 per gallon over the last week, a trend that could push the national average below $3.50 by Election Day if it continues. The housing market continues its slow recovery and consumers remain more upbeat than some indicators suggest they should be.
Only a few things could move the Obamanometer decisively, in either direction, by Election Day. The most important will be the jobs report that comes out on Nov. 2, four days before the election. A strong report would validate the surprising drop in the unemployment rate in September to 7.8 percent, but some economists think that was an anomaly, with a strong chance the jobless rate could pop back up to 8 percent or higher. That would obviously hurt Obama. Stocks could snap back, if third-quarter earnings somehow rebound. But that too seems unlikely. Instead, voters will probably go to the polls in November feeling ambivalent about whether the economy is improving or stagnating.
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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.