This one would likely have to happen pretty soon to have any real effect on the election (unless it was a collapse on the order of the Great Recession). We’ve been in a very slow and very long recovery since Obama’s first year in office. Jobs have been created and the economy is now doing so well the Fed is raising interest rates again. But because it has been such a long recovery, some economists are starting to wonder when the business cycle will shift again, turning the economy downwards.
I’m a firm believer that the economic cycle is not much connected to politics. It’s largely independent of actual policies from Washington. Oh sure, some political tweaking of the economy has direct effects, and some long-range policies can serve to set the stage for a collapse (the repeal of Glass-Steagall, for instance). But in general, the economic boom-and-bust cycle isn’t all that connected to politics.
If the economy does go south in a major way next year (with enough time for voters to react to it), then what might happen is that historical norms take over and the party that’s held the White House for two terms fails to win a third term. This has only happened once since the 1950s, in fact, when George H.W. Bush won a third Republican term in 1988. Barack Obama beat his own historical odds when he got re-elected, because no president had won re-election with the economy in such bad shape (people were predicting Obama’s loss purely on the unemployment rates, at the time). If the economy has problems next year, independent voters may be looking for a change in November. Which would be bad news for Hillary.