Is the Market In for a "One Term Rally"?

Savvy political observers in the blogospere like me (and even some actual paid journalists in the MSM) all knew that Obama's Bus Tour would flop and that it seemed decidedly ill-thought out given the recent downgrade of the US's sovereign debt rating. Likewise, the decision to cap it off with the simply disastrous Martha's Vineyard vacation which has the double distinction of showcasing an actual lack of leadership as well as having terrible optics - an example of Obama's tendency to find, in Walter Russell Mead's characterization, the "sour spot". Well, the effects of Obama's terrible August are starting to show up in the polling, and the results are unambiguous. Take a look at this RCP chart. Polls that include recent periods show massive declines in the Lightworker's approval rating. The less severe declines don't capture the entire month of August. I think the polling averages will continue to get bleaker for the Smartest President Ever as the averages reflect mid to late August polling.

Looking at the RCP data, I am struck by two things. First, except for two small periods, Obama's approval trajectory has been nothing but one way, down. It is almost as if this guy's incapacity to lead in a way that pleases voters had become obvious from day one. (Actually, it was to some of us, but you certainly didn't here or read about it.) The second thing that struck me was the two brief instances of inflection that Dear Leader experienced, one around the start of the year and the other after the bin Laden killing. The former was almost entirely a media conjuring. The MSM puffed up lame duck "victories" into some sort of unassailable comeback. I chronicled and debunked that mirage rather thoroughly here, here and here. I also came out fairly clearly on the "bin Laden bounce will fade" side.

So, what is my point? My basic conclusion is this - the mega-trend, or the "big idea", is that Americans have always known deep in their bones that Obama was a gamble and they are now 90% convinced that they have lost that gamble. There is almost nothing that can stop this trend from playing out. Look at the two things that had any effect in reversing the big trend, one was a media-created mirage and the other was a "Black Swan," neither of which stuck. The MSM is increasingly less inclined to devote the energy to conjuring up a pro-Obama illusion (note I said less inclined, as opposed to not inclined), so I wouldn't be counting on a game-changing performance out of the MSM. That leaves a Black Swan development that will have to outdo even the monumental significance of killing bin Laden. That is a long shot, a very long shot.

Finally, why should we all care? I don't know why you should care but I'll tell you why I care. First and foremost, I think this is good for my individual liberty and for the country broadly. Secondarily, I think this is good for the stock market. The economy will muddle through for the remainder of this year and into next, but the further Obama slides and the lower his chances at reelection get, I think we will see an inversely proportional growth in economic optimism. The more it looks like Obama is a goner, the more American business leaders will feel like a giant weight is being lifted, the more entrepreneurs will feel like the sky is clearing. I predict a rough inverse correlation from here on in between Obama's poll numbers and the stock market - call it the "one term rally."