Super Tuesday highlights growing attraction of US markets
Super Tuesday is a big day in US politics. It is the moment when the country’s main opposition party gets its first real pointer as to who will challenge the White House incumbent for office following the November 6 presidential election.
Ten key US states are up for grabs. The result will identify the strongest candidate from amongst the all-Republican Party list. The winner becomes the party champion charged with running a campaign, even fiercer than that against party rivals, to ensure no second term for Democrat Barack Obama.
The complex laws, traditions and trends surrounding the bruising battle that culminates in Super Tuesday are mostly lost on foreign observers. Most of the Republican Party candidates are not familiar to non-US investors, and the uncertain outcomes suggested by such a major contest inevitably weigh on market sentiment.
Recent studies indicate that the impact of uncertainty on elections is stronger in countries with higher levels of national debt, and at times when there is potential for large changes in government policy. Both conditions certainly apply to the US.
Yet, defying all the doomsayers, indicators from the US economy have been better than expected.
Bob Doll, chief equity strategist of fundamental equities at BlackRock notes that the general trend in the US over the past couple of months has been for positive surprises to outweigh negative ones, with the overall tone of data showing economic improvements.
He points to lower jobless claims, and signs of life in the housing market. The banking and credit sectors are also continuing to heal, which will “help perpetuate the type of positive feedback loops in the economy that we are starting to see”.
Expectations for Q1 2012 GDP growth are just 3%, the same as for Q4 2011, but with little positive news in other markets, that is enough to attract investor attention. Consumer confidence has risen sharply, as have manufacturing and construction indices.
Doll predicted last year that the White House would manage skilfully to deliver growth just in time for the Presidential election in November, and that view appears fully on track. “Given the improvements in US economic growth and the divided results we have seen in the primary process so far … it is looking like President Obama’s re-election chances have been improving,” Doll notes.