The markets tempted fate on Tuesday morning, forgetting the lessons of 2016 as they pre-emptively celebrated a Joe Biden victory.
The Democrat is the clear favourite – though Trump, that unkillable movie monster, can never be counted out, especially since Biden’s chances tightened over the weekend according to SpreadEX’s prices.
Since last Friday, the Democrat has moved from a fixed odds price of 4/11 to 1/2, with Trump going in the other direction, from 15/8 to 7/5.
Biden’s Electoral College Votes spread is also the lowest it’s been since the very start of October, falling from a peak of 324-332 in the middle of last month to 308-216. Trump, meanwhile, is now at 222-230, up from 218-226 last Friday.
For context, in 2008 Barack Obama won 365, in 2012 he won 332, and in 2016 Trump won 304. And as a chilling reminder, SpreadEX had Trump at an Electoral College Votes spread of 222-234 on November 8th 4 years ago.
As for Total States Won – including DC, but with the congressional districts of Nebraska and Maine based on state-wide popular vote – Biden is at 25.25-26.75 to Trump’s 24.25-25.75.
That stacks up against 28 (plus DC and Nebraska’s 2nd congressional district) for Obama in ’08, 26 (plus DC) for the Democrat in ’12, and then 30 (plus Maine’s 2nd congressional district) for Trump in ’16.
All this is of course complicated by the respective paths to victory for each candidate. Biden, like Clinton, could well win the popular vote, and still lose on Electoral College votes. Pennsylvania is the key for the challenger – so the markets will take comfort from the fact SpreadEX is offering the Democrats at 16.75-18.25 to the Republicans at 6.75-8.25, where the winner gets 25 points and the loser 0.
Choosing to ignore the slim – but not slim enough – likelihood of Trump winning a 2nd term, the markets continued to aggressively rebound on Tuesday. This also meant they were fairly sanguine in the face of the idea that Trump may not react well to defeat, and the myriad horrible ways that could play out.
The main reason why a Biden win is so sought after from a market-perspective, is that a ‘blue wave’ – i.e., the Democrats crucially taking the Senate – would see a stimulus plan far greater than anything Republicans would be willing to go for.
That’s why you have the FTSE up 1.2%, and the DAX and CAC up 1.5% apiece – investors have gotten a sniff of stimulus, overriding any fears over uncertain results, recounts or a refusal to move out of the White House by the incumbent.
And after rising 425 points last night, the Dow Jones is set to continue its comeback, with the futures currently pointing to a 300 point increase. That’d push the index back above 27,200 – still around 1400 points off its mid-October peak.
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