Wall St and its critics to keep close eye on Obama's state of the union speech

President Barack Obama presides over an economy that has recovered considerably since he gave his first state of the union address. But as he prepares to embark upon his second term, critics from all sides agree there is much work still to be done.

Obama is expected to put the economy at the centre of Tuesday's speech. When Obama gave his first address in February 2009, unemployment was 7.8%, slightly lower than today, but was set to rise as the economic crisis worsened. Unemployment remains stubbornly high, but it is gradually falling, while house prices are rising and the stock market has recovered.

"The economy looks stable," said Steve Cunningham, director of research and education at American Institute For Economic Research and a professor at the University of Connecticut. "Structural issues remain. There is uncertainty about fiscal policy, which is still having a negative impact on the economy," he said. But beneath that, the economy is solid, he said.

In fact, in its latest report, the AIER calculates that while the recovery appears lackluster it is only weak in comparison to the boom that preceded it. "That comparison is unfair," said Cunningham. In reality, growth is now "close to normal".

Dan Greenhaus, the chief global strategist for BTIG, said Wall Street is not expecting big surprises from the president. "It looks like he is going to double down on the policies he thinks are right."

He said Obama was likely to blame Republicans for Washington's continuing failure to broker a long-term solution to the US's fiscal woes. Such a stance increases the likelihood of massive budget cuts – known as sequestration – which are set to kick in come March, he said.

"Whoever is to blame, it looks like it is going to happen," he said. Most of the impact will be felt in defense. Cuts in defense spending helped turn the US's gross domestic product (GDP) negative at the end of last year.

Sean West, a policy analyst at Eurasia Group, a political risk consultancy, said the president was likely to "turn up the heat" on Republicans about sequestration. "He's the most popular politician in America right now. I think he will try to increase the political price Republicans face for not doing anything." But with both sides deadlocked, West said sequestration looked increasingly likely.

It's not just Wall Street that will be watching Obama carefully tonight. Its critics will be tuning in, too. "We want to hear that he is still committed to holding Wall Street accountable," said Brian Kettenring, director of Campaign for a Fair Settlement, which has lobbied for harsher actions against the banks after the financial meltdown. More than four years after the worst financial crisis in a generation, Kettenring said Obama had shown little appetite for real reform of Wall Street. "The most generous thing you can say about him is that he's been distracted, and that that's a very generous interpretation," he said.

"This is an opportunity for him to answer the question: does he want to be remembered as the guy who held Wall Street accountable or the guy who let the bankers run off with the people's money?"