Politics and Regions
5 min read 13 May 20
Summary: James Carville was candidate Bill Clinton’s chief strategist for the 1992 election. When asked to emphasise the single most important issue to voters, Carville responded: “It’s the economy, stupid!” Incumbent President George W.H. Bush at that time had seen his poll numbers surge post the successful Operation Desert Storm in Kuwait, but at home the US economy had started to slip into a recession, and Carville made sure no opportunity was wasted to emphasise the ‘Bush recession’. Bush lost the 1992 election and followed in the footsteps of Jimmy Carter in 1980, who also lost in his re-election attempt against a backdrop of poor domestic economic performance. All Presidents who have sought re-election during periods of economic growth have easily secured their second terms; Reagan (1984), Clinton (1996), Bush II (2004), and Obama (2012).
Up until January 2020, Donald Trump never let an opportunity go by without boasting how successful the US economy and the stock market had been during his term as President. Understanding how important a strong and growing economy is, as Carville did in 1992, Trump intended to use that as the springboard to a successful re-election campaign this November. Even with trade wars with China and the EU, he could show unemployment reaching a record low of 3.5%. However, three months is a long time in politics and much has changed. With the US economy in lockdown and unemployment numbers surging, Donald Trump is currently sitting on a unenviable position where the economy has net lost jobs during his tenure.
If history is any guide to the future, no president would ever be re-elected on these economic numbers.
There are three main factors worth looking at to try and anticipate the November result:
Current polling, especially in the swing states of Pennsylvania, Michigan and Ohio looks favourable to Biden, but the preoccupation at this time is with the pandemic and not the upcoming election. Another factor we should not overlook is a President’s popularity with their base. Both Jimmy Carter and George W.H. Bush were challenged by members of their own party for re-nomination, none of the re-elected Presidents had a challenger. Donald Trump has not faced a credible challenger for the 2020 Republican nomination. Keeping the base loyal is very important for the election day turnout.
2020 has not been an ordinary year and will not see an ordinary US Presidential election. Many factors will come in to play as to whether or not Donald Trump is successful in his re-election efforts, but the economy will be the key issue. While the stock market is factoring in an economic recovery, in the next few months it will be crucial to see if the real economy does start improving rapidly enough.
The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.