An improving economy, personal likeability and a weak Republican field of candidates has put Barack Obama firmly in the driver’s seat for the November presidential election, Valliere, a well-known Washington insider, told attendees at Fortigent’s annual winter conference in Savannah on Friday.

Although Mitt Romney is still likely to be the Republican nominee despite his recent setbacks, he will be “damaged goods,” Valliere said. The recent string of Republican primary debates have hurt the party badly, he said, adding that the GOP also faces a  huge “gender gap” as polls show support from only 40 per cent of women.

Valliere warned the assembled wealth and money managers in Savannah that “a dark cloud will hang over the market” in the fourth quarter because of uncertainty over the fate of the expiring Bush tax cuts on the wealthy. But, he predicted, despite what is likely to be a year-long stalemate between the two parties, lawmakers will engineer a compromise before the end of the year.

1914 redux?

The biggest wild card for the coming year on both the markets and the presidential election will be geo-political, Valliere said, most notably the mounting tensions between Israel and Iran over the latter’s nuclear development program.

Valliere contended that the recent string of actual and attempted assassinations and bombings involving the two countries can be seen as evidence that “the war is underway.” Even more ominously, he compared the events of the last few months to the escalation of tensions in Europe in the summer of 1914 that served as a prelude to the outbreak of World War I.

“There’s growing sense of inevitability about this conflict that’s similar to 1914,” Valliere said. If Israel is convinced Iran is developing nuclear weapons that threaten its security, he maintained, the ideal of window of opportunity to begin bombing Iranian facilities would be between late August and late September, when President Obama would be most vulnerable politically and unlikely to not support Israel.

Israeli bombing could take at least several weeks, Valliere said, risking Iranian retaliation and likely sparking a sharp rise in oil prices. “It is not a pretty picture,” he said, before telling his audience to “enjoy the next few months while you can.”