The U.S. stock market rout triggered by a deadly coronavirus outbreak suggests President Donald Trump is in grave danger of losing the November election, according to a forecasting model by Moody's Analytics, a leading Wall Street research firm.

The U.S. stock market rout triggered by a deadly coronavirus outbreak suggests President Donald Trump is in grave danger of losing the November election, according to a forecasting model by Moody's Analytics, a leading Wall Street research firm. That's a big change from what the model showed using data from February, when higher stock prices and Trump's steady approval rating pointed to the Republican president coasting to victory with 351 votes in the U.S. Electoral College to 187 votes for a Democratic challenger. But financial markets have since plunged with the spread of the virus disrupting economic activity around the world and sparking fears of a global recession.

A drop in the Standard & Poor's 500 stock index to 2,500 points - roughly Thursday's closing level - would signal enough economic anxiety to cost Trump the election, Bernard Yaros, an economist at Moody's Analytics, said on Friday. "The S&P 500 would need to be 2,500 or less for Trump to lose," Yaros told Reuters in an email. He did not elaborate on the expected electoral college results in that circumstance. U.S. companies are already reporting layoffs due to the health crisis but most economic data that will reflect that - and which experts use to make forecasts - won't be available for weeks.

That has Moody's Analytics, a leading forecasting firm, relying more on financial market movements which respond quickly to signs of economic trouble. After plunging into bear market territory on Thursday, the S&P 500 recovered a small slice of its losses on Friday, finishing higher at 2,711 points after Trump declared a national emergency over the coronavirus. The U.S. Federal Reserve, seeking to prop up the economy amid the crisis, slashed interest rates to near zero on Sunday in an emergency move. The coronavirus causes the COVID-19 respiratory disease and has killed at least 60 Americans and more than 6,000 worldwide. Researchers have long found presidential incumbents do better at the polls during a strong economy but because voters also weigh other matters, many forecasters factor presidential approval ratings into their prediction models. Yaros said his model's latest predictions, including the scenario he outlined to Reuters on Friday, use Trump's most recent Gallup approval rating of 47% in late February. That was a near-record high for his presidency after rising during impeachment proceedings in the Democratic-controlled House of Representatives.

The Republican-controlled Senate acquitted him on Feb. 5 after a weeks-long trial. In a report to clients on Thursday, Yaros said a decline in Trump's approval rating to 37% and the S&P 500 at 2,700 points would point to a Democratic candidate narrowly winning the Electoral College with 279 votes to Trump's 259. U.S. voters pick their president through an indirect vote, selecting electors at a state level. To win the presidency, a candidate must win at least 270 votes from the 538 electors in the Electoral College. Gallup is expected to release an updated approval rating for Trump this week. The president has come under fire for his response to the crisis and for initially downplaying the severity of the outbreak. Voter opinions about the coronavirus response so far remained divided along party lines, according to a Reuters/Ipsos poll from March 2-3, with Democrats more likely than Republicans to see the outbreak as an imminent threat to the United States and to say there were taking steps to be prepared. While forecasters at U.S. universities and on Wall Street use sophisticated statistical models to predict election results, they do not have a pristine track record. Many forecasting groups, including Moody's Analytics, failed to predict Trump's victory in 2016. Moody's Analytics said its failure in 2016 appeared due to higher-than-normal voter turnout in the U.S. Midwest. The coronavirus, which is currently making many Americans afraid to leave their homes, is another wild card for turnout in November.

(Reporting by Jason Lange, Editing by Soyoung Kim and Diane Craft) Thomson Reuters Foundation

• One year into Donald Trump’s presidency, the economy has maintained solid growth momentum

in what has so far already been the country’s third-longest economic expansion on record. In

a bid to better assess what 2018 holds for the U.S. economy, we polled our global network of

analysts. Of the sample of economists from international and local economic institutions we

contacted, 95 answered the survey. This special report includes the highlights from our poll.

• The analysts surveyed are broadly in agreement regarding the robustness of the economy’s

fundamentals, and they largely see 2018 growth either accelerating or remaining steady at last

year’s rate of expansion. They expect the recently approved tax rewrite and a weaker dollar to

shore up business investment, but many are skeptical on the long-term benefits of the tax cuts.

• The majority of the economists surveyed expect stronger inflation and a tight labor market to

warrant three interest rate hikes this year. On trade, analysts believe NAFTA will be preserved

with only minor changes, while most respondents see no meaningful trade dispute taking

place with China. Finally, analysts are split on Democrats’ chances at taking back the House of

Representatives in this year’s November midterm elections.

Healthy GDP data for the fourth quarter rounded off a strong year of growth in the U.S. economy. Household spending rose in Q4 at a solid rate on continued job growth, increased wages and high stock prices, while fixed investment benefitted from sky-high business sentiment and reconstruction efforts following weather-related disruptions in Q3. The GDP report came on top of a string of upbeat data releases suggesting momentum likely carried over into 2018. Survey-based manufacturing data for December and January showed soaring order books, while initial jobless claims continued to decline up to the week ending on 20 January, an early indication that employment growth remained resilient at the start of the year. Despite the rosy economic picture, political wrangling dominated headlines in recent weeks. Following a brief shutdown, Congress struck a deal on 22 January to reopen the federal government through 8 February but failed to resolve the underlying issues that caused the shutdown, including an agreement on DACA. An accommodative fiscal stance should lift consumer spending and nonresidential investment this year, while an exceedingly tight labor market, strong momentum in the housing sector and upbeat stock prices will continue to buttress economic activity. FocusEconomics panelists see growth of 2.6% in 2018, which is up 0.1 percentage points from last month’s estimate. In 2019, growth is seen moderating to 2.1%.

Inflation eased to 2.1% in December from 2.2% in November. That said, core inflation inched up to 1.8%, reinforcing market expectations of an interest rate hike at the Fed’s March monetary policy meeting. Members of the FOMC project three interest rate increases in 2018 as employment continues to rise and inflationary pressures mount. FocusEconomics panelists see inflation averaging 2.2% in both 2018 and 2019.

Retail sales finished the year on a strong note, growing 0.4% from the previous month in December and falling just short of market expectations of a 0.5% month-on-month increase. December’s print came in below the upwardly revised 0.9% expansion recorded in the previous month. Although December’s figure marked the lowest rate since August, it suggests sustained robustness in private consumption growth in the fourth quarter and showcases the overall health of the U.S. economy. Strong December sales were led by a very sturdy performance in non-store retailers, a component dominated by e-commerce, which saw sales jump 1.2% month-on-month in December. Furniture stores and building materials retailers also performed above average, with monthly sales growing 0.6% and 1.2%, respectively. Vehicle sales increased modestly by 0.2% in December, whereas gasoline sales remained steady from the previous month. Meanwhile, miscellaneous store retailers logged a notable 2.9% mom dip in sales, while clothing stores and electronics and appliances stores recorded smaller sales contractions in December. In annual terms, growth in retail sales moderated to 5.4% in December from an upwardly revised multi-year high of 6.0% recorded in the previous month. Annual average retail sales growth ticked up to 4.6% in December from 4.5% in October, marking the highest print in nearly five years. 

Whereas strong sales numbers point to a marked contribution from consumers to GDP in the last quarter of the year, it also points toward potential overheating and pro-inflationary risks in the U.S. economy, which could lead to rate hikes by the Federal Reserve as early as the first quarter of 2018. FocusEconomics Consensus Forecast panelists expect private consumption to grow 2.6% in 2018, which is up 0.2 percentage points from last month’s forecast. For 2019, the panel sees private consumption increasing 2.2%.

Monetary Analysis
Core consumer prices, which exclude volatile items including food and energy prices, rose 0.3% from the previous month in December. This came above market expectations of a 0.2% increase and followed the timid 0.1% month-on- month rise recorded in November. The print was largely driven by strong price increases for used cars and trucks, housing costs and medical care. These dynamics led core inflation to inch up to 1.8% in December from 1.7% in November. The lack of meaningful inflationary pressures, despite robust economic growth and an exceedingly tight labor market, has been at the forefront of the debate among Federal Reserve officials. In this sense, December’s stronger-than expected core inflation results are likely to reinforce market expectations of an interest rate hike at the Fed’s March monetary policy meeting. However, any additional hikes this year—the Fed’s “dot plot” currently shows three interest rate increases in 2018—will remain largely dependent on the evolution of core prices. FocusEconomics Consensus Forecast participants expect inflation to average 2.2% in 2018, which is up 0.1 percentage points from last month’s forecast. For 2019, the panel also expects inflation to average 2.2%.

Many experts have attributed the recent Dow Jones Industrial Index (DJI) slide to centrist republicans losing faith in POTUS and discussing impeachment. While impeachment is a risk - there is a more sullen reality to why the US markets reacted: Washington cannot work under the circumstances. It is very clear, the gridlock everyone hoped had moved on is back in a political bottleneck with more and more scandals piling up everyday. The current administration is on-and-off crisis mode and openly running their administration with crisis communication tactics to cover the “shoot from the hip” presidency. It is worth noting that the market did recovery quickly, but the correction - or slide - was still the most significant since the election in November. Other factors are in play as well,
Soros and his hate for Trump and even the president’s market savvy money manager friends could look to influence numbers through complex trade positions and derivatives, discombobulating the ethical fabric of American economic data.

All of this invigorates newly created enemies inside the permanent government and that has affected the perceived political capital available. Without a doubt this is the barometer we can look to regarding market corrections for the current administration - despite volatility indexes still lagging. POTUS went after an Obamacare-AHCA takedown as quick as he could and it was a failure. That said a second vote was arranged and it passed. However the house has yet to send the act (AHCA) to the senate. Why? The house is waiting on its own bottleneck to clear as they have existing internal politics with each other and this one issue surrounds the nonpartisan Congressional Budget Office (CBO). There is a slow down and there is gridlock and it is largely from Trump’s personal drama involving his character before presidency, his Russian business ties and his ongoing obscuring - or covering up - of an investigation.

More at HuffPost

US New Home Sales (Feb) M/M 592K vs. Exp. 559K (Prev. 555K, Rev. 558K)
US New Home Sales (Feb) M/M 592K vs. Exp. 559K (Prev. 555K, Rev. 558K)

From Nomura:

“Initial jobless claims: Initial claims remain at historically low levels after a continued decline during the recovery. For the week ending 11 March, the 4-week average of initial claims was at 237k, up only marginally from the prior week. As labor market conditions remain healthy, we continue to expect this series to remain low.” “New home sales: New home sales rebounded in January, increasing 3.7% to an annualized rate of 555k. However, incoming data suggest some moderation in this series in February. Sales of single family homes index in the National Association of Home Builders (NAHB) housing survey inched downward slightly, but remained at an elevated level. However, mortgage applications for home purchases fell modestly, in part, due to higher mortgage rates which picked up after the election. In addition, the latest NAHB report indicates that industry headwinds such as labor shortage and supply-side constraints still persist. Therefore, we forecast a 0.5% m-o-m increase to an annualized rate of 558k (Consensus: +1.8% to an annual rate of 565k).”

From Goldman:

Hard and soft data on the US housing market The economic indicators monitored by analysts can be roughly divided into soft data (e.g., sentiment and confidence surveys) and harder data (e.g., realized employment, production and sales measures). In the immediate aftermath of the November US presidential election, forward-looking sentiment indicators picked up solidly, in advance of actual gains in harder data ("Sentiment Ahead of Data", Global Markets Daily, January 17, 2017). The strong payrolls report in February is one example of a hard data point potentially validating the positive outlook manifested in consumer and business confidence surveys. The pattern of strong hard data following strong soft data could be a reflection of the forward-looking nature of the surveys, but could also partly reflect a causal connection, with strong "animal spirits" causing the pick-up in the harder data.

Philadelphia Fed Business Outlook Survey : Prior: 21.5, Prior Revised:

19.7, Consensus: 16.0, Consensus Range: 12.0 to 22.2, Actual: 23.6

Housing Starts : Prior: 1.090M, Prior Revised: 1.102M, Consensus:
1.200M, Consensus Range: 1.100M to 1.275M, Actual: 1.226M

Initial Jobless Claims Drop 15,000 to 234,000, vs
255,000 Estimates; Week Ended 1/7 Revised Up to 249,000

US Building Permits (Dec) M/M -0.2% vs. Exp. 1.1% (Prev. -4.7%)

US Philadelphia Fed Manufacturing Index (Jan) M/M 23.6 vs. Exp. 15.8