3 things that could break Biden’s way

Democrats are distraught at a recent New York Times poll showing former President Donald Trump outpacing President Biden in five of six swing states likely to determine the winner of next year’s presidential election. In five of those states — Georgia, Pennsylvania, Michigan, Arizona, and Nevada — Trump is leading Biden. Only in Wisconsin does Biden have a narrow edge over Trump.

The 2024 election is still 12 months away, and a lot could change. Trump is facing 91 criminal charges in four separate prosecutions, and some of those cases could start and conclude before Election Day 2024. So Trump could be a convicted felon by the time most people vote next year. Biden is 80 and Trump is 77, raising the possibility of a major health problem that could impair either man’s candidacy.

There will also be changes in the economy and in other parts of the world that affect voter attitudes. That could benefit Biden if current trends continue. Three things to watch for:

Falling prices. Inflation is Biden’s biggest economic problem, and voters’ disapproval of Biden’s handling of the economy may be his biggest political liability. So the direction of inflation may be more important to Biden’s reelection odds than any other single factor.

Inflation peaked at 9% in June 2022, and it’s now down to 3.7%. It’s going in the right direction. But prices of most things are still rising — they’re just rising by less than they were a year ago. That’s not good enough for many voters, whose incomes have failed to keep up with the spiking cost of food, rent, gasoline, and other staples.

So what are the odds of deflation, or actual price declines that will make goods cheaper for the typical consumer? It’s actually quite possible.

Goods inflation is now down to a scant 1.4%, and that could turn negative before long. David Rosenberg of Rosenberg Research pointed out in his Nov. 6 newsletter that the Baltic Dry Index, which measures global freight rates, is down 74% from its peak two years ago, which augurs falling prices for many shipped goods. “We are into a phase of goods deflation,” Rosenberg wrote. “This is going to be a major source of disinflation/deflation over the coming months.”

Consumers care most about three types of inflation: Food, housing, and gasoline. Food inflation is down to 2.4%. Grocery giant Kroger (KR) said during its latest earnings call that food prices are returning to normal — and actually denting company profits. There aren’t going to be fire sales in the cereal aisle, but food prices may moderate enough to tame the sticker shock that many shoppers have experienced during the last two years.

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Rent is another important trend. The official inflation rate for rent is an uncomfortable 7.4%. But other indicators, such as rent indexes maintained by Zillow and CoreLogic, show smaller increases, and those tend to foretell where the official government measure of rent inflation is headed. CoreLogic, for instance, says year-over-year rents are rising by just 2.9%, with rents falling in cities such as Austin, Las Vegas, and Miami.

“The dominant rental measures in the US are deflating, and this has yet to show up in the [official] statistics,” Rosenberg wrote in his Nov. 6 newsletter. Many renters won’t notice until they sign a new lease. Voters have been unimpressed with a declining rate of inflation, but actual price drops might get their attention.

Stabilizing oil and gasoline supplies. The escalating Middle East war between Israel and the Iran-backed Hamas terrorist group is awful, but one bad thing hasn’t happened: Oil prices haven’t spiked. In fact, oil prices are a couple of dollars per barrel lower than they were before Hamas ignited the war by attacking Israel on Oct. 7. “Concerns about the risk of immediate supply disruptions in the Middle East have eased somewhat as Israel’s military operation remains largely contained to the Gaza Strip,” Eurasia Group wrote in a Nov. 6 analysis.

Here’s another development favorable for Biden: US oil production has hit a new record high of 13.2 million barrels per day. Yes, that’s right: Domestic oil production is even higher now than it was under Trump. The average annual price of gasoline is a manageable $3.42 per gallon, with US drivers paying no premium for the Israel-Hamas war — or for the Russia-Ukraine war, either. Energy analysts think that, barring some major disruption, slowing global growth plus a weak Chinese economy could keep energy prices subdued well into 2024. Biden needs that.

An end to the Israel-Hamas war. Israel’s invasion of Gaza is underway, and the outlook is for a military operation that takes months to satisfy Israel’s goal of dismantling Hamas. But that’s not years. Within six months, say, Israel might have accomplished its mission, giving the Biden administration an opening to press some kind of “day after” plan that addresses Palestinian concerns along with Israeli ones.

It’s farfetched to think anybody will solve the broader Israel-Palestinian disputes. But it’s also true that once the shooting and the bombing stop, Americans will pay less attention and the sense of national agitation will ease. Biden will never be able to take a 2024 victory for granted. But he might get a little help from circumstances.

Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.

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