We’ve just seen two milestones passed on Betfair’s Next President market. First, the total matched has passed $50M – my estimate is it will go beyond $200M by polling day.
Second and more significantly, Donald Trump has passed another threshold in trading below [3.0]. At [2.96], equivalent to a 34% chance, he’s at his lowest odds yet in response to an unarguably strong run in the polls.
At [1.63], Hillary Clinton is bigger than when I backed her two days ago at [1.57]. I’ll get to that shortly but the key number for me remains how the prospect of ‘others’ is over-rated. The current odds imply there is better than a 6% chance of someone else becoming president – in my view it should be less than 1%.
Some of Trump’s recent momentum is easily explained by Clinton’s shortcomings and a catastrophic news cycle, that culminated in her fainting on Sunday. As explained on Tuesday, I think this is probably her low point and expect improvement over the next week or so.
The news cycle has shifted a bit with more scrutiny of Trump’s comparative lack of transparency regarding tax returns and business interests. Obama’s intervention could make a slight difference and if she bounces back on the campaign trail today, this could easily swing round. My general approach is to cut through the inevitable froth and over-reaction and I remain confident that the fundamentals favour Clinton.
Nevertheless, I must acknowledge other important factors that lie behind this rise. Trump has indisputably improved his performance, especially by using a teleprompter. That means less gaffes and he’s exercising more self-control on Twitter. Given that his opponent is almost as unpopular, that has meant she sucked up the negative publicity for a change.
The other big problem for Clinton is the good numbers for Gary Johnson and Jill Stein, especially among millennials – a key component of the Democrat coalition. I’ve written before how these voters hold the key to the final result and offer Trump his best route to the White House. We’ll see what happens to their share after the debates, assuming Johnson doesn’t get in.
Right now, this is bad news for my positions. I could take an early hit and start again from scratch but still prefer to play the long game.
Regarding strategy going forward, I need the state and electoral college markets to liven up. Whilst I understand why the odds are moving towards Trump, I remain convinced that they represent vastly inferior value compared to less ambitious targets.
The electoral college remains overwhelmingly in Clinton’s favour and this is not accurately factored into the outright odds. Let’s say she were to lose Ohio and Florida – something I’m not assuming but recognise is a real possibility. This still isn’t nearly enough for Trump.
Clinton’s easiest route involves winning NH, WI, CO, VA, PA and MI. The polls, odds and general consensus suggests she is strong favourite in each of them. Then there is the gamechanging state of North Carolina, which Romney won in 2012. If Clinton wins those 15 electoral college votes, we can remove New Hampshire and Wisconsin from the aforementioned firewall (or just Virginia).
We must also remember that Trump has altered the map, bringing other states potentially into play. Arizona, Georgia and Texas are all in-play according to the polls. Given her ground game advantage, she could steal a state or two that Republicans normally take for granted. A much improved Hispanic turnout – not accounted for in polls – changes the maths in several key states.
There are cover bets and new angles to be had at some stage involving these permutations. Watch this space.