Markets sour on both Romney and Obama speeches, but conventions still boost Democrats

While the purpose of the political conventions was to draw clear distinctions between President Barack Obama and challenger Mitt Romney, the two men remain identical in one key respect: When they open their mouths before a national audience, their odds of winning in November suffer.

As you see here, the likelihood of Obama's re-election jumped about 1 percentage point immediately after Romney's address last Thursday evening, and fell slightly after Obama's turn last night. (The Signal's model for predicting the outcome of presidential elections relies on many contemporary and historical factors, but the fine-tuned reactions you see here are driven by prediction markets.)

Sources: Betfair, Intrade, HuffPost's Pollster, RealClearPolitics

Romney received a tempered bounce in the polls from his own convention, leaving the polls virtually tied. The Democratic convention appears to have been slightly better received. While first lady Michelle Obama's speech did not move the markets much by itself, by the time former President Bill Clinton exited the stage on Wednesday night the markets were declaring the DNC a success—only to dip again after the president spoke. This does not mean he gave a bad speech. It means that he matched expectations and no more.

Now attention turns to this morning's monthly release of jobs data. The expectation was for between 130,000 and 140,000 new jobs, while the preliminary figure is only 96,000. But, there is a diminishing return to economic news at this point in the cycle. Unless the number was more dramatic—say, below 50,000 or above 200,000—we did not expect too much effect on the election.

Overall, however, the political congestion of the past two weeks has clearly benefited Obama, who enjoys the greatest luxury of incumbency: Time does not favor the challenger. In other words, Romney has yet to definitively make the case for a change in leadership, and the days he has left to do so are dwindling.

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David Rothschild has a Ph.D. in applied economics from the Wharton School of Business at the University of Pennsylvania. Follow him on Twitter @DavMicRot and email him at