President Bush's Re-election
Deutsche Asset Management---Froehlich, Robert---Chief Investment Officer
concern about job losses is a top election issue. so how can we use employment data to determine george w. bush’s chances for re-election? and how will the election results impact the market ? robert froehlich is chief investment strategist for u.s. mutual funds at deutsche asset management americas and has developed an index using economic and market data he feels is crucial for incumbent presidents in an election year and joins us from chicago to explain the proprietary index and why it can be an important tool for investors. tell me, of your index, it’s called the i.c.u. index and the it stands for interest rates, consumer prices and unemployment. stay with me, folks. tell me, mr. froehlich, if i’m not doing a good job.
>> you’re doing great.
>> thank you. you combine the current inflation rate, the current 10-year treasury yield and the unemployment rate and come up with the reading. tell me why this is an important number and how it applies to president bush’s re-election?
>> what we―why we think it’s important is in an election year when you have an incumbent president, you have a given. you have a known. you know how they’ve impacted things that are very, very important to the voters. more importantly, to the voters’ pocketbooks so i said let’s see if we can identify the issues most important to the voters’ pocketbook and that’s how i came up with the issue of the interest rates, consumer prices and unemployment and when i did that, i said let’s take that number and back-test it, in other words, look at incumbent presidents that have actually lost an election that they weren’t re-elected and see what the numbers were because in the last 50 years there have only been three presidents that were incumbent presidents running for re-election and weren’t re-elected. it was jimmy carter―gerald ford in 1976, jimmy carter in in1980 and george bush sr. in 1992 and when you look at let their i.c.u. index, it was off the chart. gerald ford was 21%, jimmy carter’s was 32% and george bush sr.’s was 17.5% so no incumbent president has ever not been re-elected if they kept the numbers below 17.5. george bush’s numbers are below 12%. i think it’s a strong message to the market that we’re still going to have this election but george w. bush is probably going to be a hands-down winner if my i.c.u. index is correct.
>> we want to belabor the point, so george w. bush scores a 12. it’s like golf, you want a low score. he gets a four for the 10-year treasury, that’s the yield, 4%. he gets a 2 for inflation and another 6 for unemployment. 2 plus 4 plus 6 equals 12 as his score. i also notice that of the three incumbents, that unemployment every single time was above 7% so maybe this index could be as simple as theu., and forget about thei.―the i. and the c.
>> we’ll always argue politics but you can’t argue the facts, when it comes to people’s pocket books, it’s always good when inflation is low, unemployment is low and interest rates are low and on a 50-year basis, the president has been doing a pretty good job in those areas.
>> there we have it, robert froehlich with deutsche asset management, thank you for sharing your proprietary i.c.u. index.
