Betfair: Why the 2020 election is most like Obama’s win in 2008
Joe Biden is trading around his lowest odds yet to win the 2020 US election following a sustained gamble. Going into the first debate, he and Donald Trump’s respective chances implied by Betfair Exchange odds stood at 56 per cent to 44%. Today they are 65 per cent and 35 per cent.
A great deal, of course, has happened in the interim, starting with the first presidential debate, which is the moment when the world takes a closer interest and it always produces a surge in betting. £11m was traded on the Next President market over the four days leading up plus a further £1m bet live during the 90-minute debate.
Read more: Facebook removes Trump post claiming flu is deadlier than Covid-19
The verdict was clear. Biden won big. Forty-eight hours of terrible reaction and polls ensued; and then everything stopped. Trump announced he tested positive for Covid-19 and betting was suspended.
Suddenly, almost any speculation seemed legitimate.
Would he be well enough to run? Would Mike Pence replace him? Would a sympathy vote, or a ‘rally around the flag’ effect, enable a turnaround? Would he emerge a humbler figure, able to transform his image with new Covid rhetoric?
By the time he left hospital such musings seemed irrelevant. Trump’s Covid experience didn’t create a friendlier narrative or a different person. Covid and the spate of infections among Republicans still dominate an awful news cycle.
There is no evidence to suggest events worked to his advantage. Quite the reverse. Polls show two-thirds believe Trump was irresponsible in handling his own infection and a similar number disapprove of his handling of coronavirus. The last thing he needs is a campaign dominated by Covid.
Since leaving hospital his bad polls have worsened. Fivethirtyeight.com rate Biden an 84 per cent chance – lower than most other models. But the betting estimate remains much lower at 65 per cent. Why?
The likeliest explanation is recent experience of US elections. At this stage in 2016, Hillary Clinton was trading at 1.19 (83 per cent) on Betfair Exchange, again following a huge gamble in response to the opening debate.
Read more: Trump rattles sabres on potential China sanctions but markets on the rise regardless
Actually, in four election cycles since Betfair’s inception, three opening debate ‘winners’ went on to lose. John Kerry, Mitt Romney and Clinton all surged at this stage. Only Barack Obama in 2008 went on to win. So Trump certainly has time to recover.
Beware overstating trends from a small sample. Each election is a standalone event, involving dynamics unique to the particular candidates and moment. Rigid models are useful but tend to miss known unknowns or profound societal changes that destroy assumptions.
A more holistic approach, considering all the dynamics, is preferable. Kerry and Romney were underdogs so their odds had plenty of room for improvement. Obama and Clinton were already favourites, yet enjoyed contrasting fortunes. Given that the former was Biden’s boss and the latter was facing Trump, these two examples are more pertinent.
Deemed a landslide debate winner, Clinton’s demise is a warning. My analysis then was that overseas bettors had kept their powder dry until the debate and swiftly concluded Trump wasn’t fit for office. A dismissive narrative grew, just as it has in recent days.
This looks more like 2008. The end of an unpopular Republican administration, following a mid-term ‘Blue Wave’ and Democrats well ahead nationally.
Critics said Obama was inexperienced and warned he could be exposed by the veteran John McCain. When that didn’t materialise on the debate stage, this firm favourite became an overwhelming one. Bettors now believed Obama could justify his strong polls. His odds became steadily shorter.
Much less recognisable than Trump outside the USA, Biden has also been defined by opponents, whether by Bernie Sanders’ online army or the GOP machine. Derided as suffering from dementia and smeared on numerous personal fronts.
Biden has led Trump consistently in head-to-head polls for five years but bettors remained sceptical. Partly due to the smears. Once they saw he wasn’t a hopeless candidate, or recognised Trump’s own weaknesses, that scepticism diminished.
Notably at this exact stage of 2008, Obama’s odds implied an 83 per cent chance – exactly the same as Clinton in 2016. Yet his position was stronger, due to negligible third party share. Boasting an average 10 per cent lead, Biden is in a superior position to both, yet available at much bigger odds. I don’t expect that to last. For me, 1.53 represents rock-solid betting value.
Odds correct at the time of writing, check Betfair Exchange for the latest US election odds. 18+ please gamble responsibly.