, Salem, MA


October 3, 2012

Economy takes center stage


Gross domestic product, the value of all goods and services produced, has been weak. It increased 1.3 percent in the second quarter of this year, a little less than the 2 percent increase in the first quarter, according to the U.S. Bureau of Economic Analysis. Ardon said a 3 percent growth rate is desirable, “and we haven’t had that.”

The U.S. unemployment rate stood at 8.1 percent in August, and it is one of the most visible economic indicators there is. Given the high rate of unemployment, one might predict Obama would be doing poorly, but polls show otherwise. But the trend in unemployment has been that the rate is falling, though it’s not coming down quickly, and a falling unemployment rate tends to favor the incumbent president.

“It is coming down, and direction matters,” Ardon said.

Conventional wisdom would have Romney ahead in the polls, so Ardon has been surprised that Obama appears to be in the lead. With about six weeks to go until the election, it’s too late for a dramatic turnaround in the economy.

“If he wins,” Ardon said of Obama, “he is winning despite poor economic performance.”

Robert Lutts

President, founder and chief investment officer

Cabot Money Management, Salem

Robert Lutts said there is “huge uncertainty” with the election, a factor that drove up attendance at Cabot’s 23rd annual conference last Friday at the Hawthorne Hotel. More than 120 clients attended, and Lutts said they have been peppering him with questions about the dynamics at play with the election.

The problem, as Lutts sees it, is a sitting president who seems comfortable raising “huge deficits,” while at the same time keeping interest rates low, in part to help finance the nation’s $16 trillion debt. This is something that impacts savers, who get next to nothing on their money market and savings accounts.

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