President Barack Obama is gaining popularity among investors as he pivots to promoting U.S. global competitiveness in the State of the Union Address he delivers tonight.
Fifty-three percent of investors now view him favorably, up from 49 percent in November, reversing a yearlong deterioration in perceptions of the U.S. president, according to a quarterly poll of 1,000 Bloomberg customers who are investors, traders or analysts conducted Jan. 20-24. The turnaround follows Obama’s conclusion of a free-trade agreement with South Korea and a lame-duck legislative deal to extend Bush-era tax cuts for the wealthy.
Investors are now almost evenly split on the impact of his policies on the U.S. business climate, compared with an almost 2-to-1 negative assessment only three months ago. During this same period, he has also regained some ground with the U.S. public.
The tax cuts, says poll respondent Charles Doraine, 63, president of Doraine Wealth Management Group in Corpus Christi, Texas, “have created a sense of certainty that we all needed.” He says recent efforts by Obama to reach out to business leaders are “an unexpected bonus.”
U.S. investors and their foreign counterparts continue to hold divergent views of Obama, as they have since the quarterly poll began in July 2009. While 56 percent of U.S. investors say they are pessimistic about the administration’s impact on the investment climate, that is an improvement from November, when 68 percent said they were pessimistic.
Obama’s personal popularity has dropped slightly among U.S. investors, with 64 percent viewing him unfavorably, compared with 62 percent in November. Among European investors, 66 percent view him favorably, up from 60 percent in November; among Asian investors, 58 percent hold positive views, up from 56 percent.
Since the “shellacking” Obama said his Democratic Party sustained in the November congressional elections, the president’s overtures to business have included bringing in former JPMorgan Chase & Co. executive William Daley as his chief of staff and naming General Electric Co. Chief Executive Officer Jeffrey Immelt to head a group of outside advisers on jobs and competitiveness. He gathered 20 corporate leaders for a meeting at Blair House in December and plans to speak to the U.S. Chamber of Commerce on Feb. 7.
Focus on Competiveness
Obama said in a videotape preview of his State of the Union speech sent to supporters over the weekend that his “number one focus” would be ensuring the U.S. can compete with economic rivals.
With control of the U.S. government now divided between the Republican and Democratic parties, pluralities of investors expect improvements over the next two years for the economy, stock market, investment climate and employment.
Obama gets higher marks than congressional Republicans, who are viewed unfavorably by 47 percent of all respondents, compared with 38 percent who have a positive impression. That represents a deterioration in the party’s standing from November, when views of Republicans were evenly split. Among global respondents, Republicans still do better than congressional Democrats, who were viewed unfavorably by 55 percent versus 30 percent favorable.
Among U.S. investors, 53 percent have a favorable view of Republicans, compared with 43 percent who hold a negative impression.
The new political balance of power means no legislation can pass without at least some support from both political parties, a prospect some investors view favorably.
“The market welcomes gridlock in Washington as ‘The Hippocratic Oath’ of ‘Do No Harm’ is embraced after the midterm elections,” says poll respondent John Spallanzani, 38, director of sales and trading at GFI Group Inc. in New York. “The stock market always wants less government, and having dueling parties in Washington ensures that no major legislation will be passed.”
Despite Republican campaign pledges to work to reduce government spending and avoid tax increases, pluralities of investors say they expect the federal budget deficit to widen, the U.S. tax burden to increase and bond yields to rise before the next election.
On trade policy, investors say by a greater than 2-to-1 margin they expect the U.S. to become more protectionist over the next two years.
The Standard & Poor’s 500 index has risen more than 5 percent since Obama and congressional Republicans reached a deal on Dec. 6 to extend the Bush-era tax cuts for two years and cut payroll taxes by 2 percentage points for one year. Many private forecasters raised their projections for U.S. economic growth after the compromise, with the median forecast for GDP growth in 2011 at 3.1 percent in January, up from 2.6 percent in December, according to a monthly Bloomberg News survey of economists.
A 45 percent plurality of investors now says Obama has struck “about the right balance” between being too anti-business and too pro-business; 41 percent say he is too anti-business. In September 2010, the last time the question was asked, 50 percent said he was too anti-business.
Still, there is an underlying discontent across international markets with Obama’s economic leadership. More than 6 of 10 global investors say he has been ineffective at setting economic policies to promote growth, a view held by majorities of investors in every region.
‘Propping Up Asset Prices’
Poll respondent Nijaz Brkich, 31, an analyst for Wellard Group in West Perth, Australia, says the Obama administration’s interventions in the economy, including $814 billion in stimulus spending and rescues of the auto industry and banks haven’t been successful. As a result, he says, “unemployment remains stubbornly high, the private economy continues to be sluggish, real wages continue to fall.”
A majority of global investors judged Obama ineffective on other tests of leadership, including improving trade with other countries, rallying international support for the war in Afghanistan, and attracting support for sanctions against North Korea and Iran. Investors were split on whether he has been effective at representing U.S. interests overseas.
Obama’s political opponents don’t rate highly, either. House Speaker John Boehner, an Ohio Republican, isn’t well-known, with 41 percent having no idea of their opinion on him. Former Republican vice presidential candidate Sarah Palin is well-known, though not well-loved: Almost three-quarters of investors view her unfavorably.
The quarterly Bloomberg Global Poll of investors, traders and analysts was conducted by Selzer & Co., a Des Moines, Iowa-based firm. The poll has a margin of error of plus or minus 3.1 percentage points.