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Will The New iPhone Save Obama’s Presidency?

13 September 2012 in Trading Ideas

A common strategy of challengers in recent presidential elections – including this one – has been to trot out the ageless question “Are you better off than you were four years ago?”

Of course, one only raises that issue if a reasonable certainty existed that some significant subset of the voting populace will answer “yes.”

And so, in these sluggish economic times, we have seen Mitt Romney point to weak growth and a high unemployment rate to wonder aloud if President Obama has this country on something less than the road to prosperity. With recent polls still showing that more than half of voters disapprove of Obama’s handling of the economy, this is clearly a case of attempting to expose the president’s greatest vulnerability.

But with less than eight weeks until Election Day — and polls suggesting that Obama has opened a popularity gap on Romney — the Republican challenger may need some stronger convincing, or the beginning of irrefutable evidence that things are going south in a hurry.

Meanwhile, Obama’s camp would like the opposite: Romney’s economic arguments falling on deaf ears and/or new signals that the US is hanging in there economically.

Is it possible that Apple’s new iPhone could be a piece in delivering the latter?

On the surface, this might seem ridiculous, if not for a note last Monday by JPMorgan Chase economist Michael Feroli, who estimated that the new iPhone could be responsible for as much as one-half of a percentage point to the country’s economic growth in the fourth quarter (as measured by gross domestic product).

Considering that JPMorgan’s estimate for fourth-quarter GDP is 2%, that’s no small contribution.

The iPhone, of course, is the iconic representative of the secular move toward adoption of smartphones and other Internet-enabled mobile devices. By Feroli’s reckoning, about 8 million iPhone 5s may be sold in the fourth quarter, while older Apple models will continue to maintain the  historically “solid” pace seen after new model releases. Combining the sales and imported cost components, the economist sees the iPhone adding $3.2 billion to fourth-quarter GDP – a 0.33% boost. However, if “adjusted constant quality” of the phones declined due to newer or better futures, then the lift would be greater, Feroli wrote.

It’s worth remembering that nobody will technically know the iPhone’s contribution to GDP until after the election (and after the end of the fourth quarter), but it’s also possible that the lines of enthusiastic customers awaiting iPhone purchase won’t do much to help Romney’s claims of a suffering consumer.

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