The market is betting wildly on Trump; is real money more accurate than polls?

Author: Wang Hui, Wang KaiwenObserver Network

The American political scene is never short of drama, especially in an election year.

As Election Day on November 5 approaches, the campaign enters its final sprint, with Republican presidential candidate Trump and Democratic presidential candidate Harris unleashing their trump cards, and the intensity of their mutual attacks escalating.

Who will win the 2024 U.S. presidential election? Will Harris become the first female president in U.S. history, or will Trump return to the White House?

Polls and Markets Are Offering Answers

As both sides' polls show a tight race, the markets are increasingly betting on Trump, and from the performance of betting and stock markets, it seems to have already accepted Trump's return.

First, Let's Look at the Polls

The U.S. benchmark comprehensive polling website "RealClearPolitics" (RCP) shows that as of October 30 local time, Trump's support rate is 48.4%, while Harris's support rate is 48%, giving Trump a lead of 0.4%.

Summary of U.S. election polling data from multiple organizations and RCP average value screenshot from RCP website

Another benchmark comprehensive polling website in the U.S., "FiveThirtyEight" (538), shows that Harris currently leads by 1.4%.

National average poll from 538 screenshot

In the seven swing states considered "decisive for the presidential election outcome," the support rates of both candidates are also neck and neck, with Trump slightly ahead.

RCP polling shows that Trump currently has 5 wins and 2 losses in the 7 swing states, compared to a previous full "turnaround" where Michigan and Wisconsin have turned "blue" again. In a poll conducted by The New York Times and FiveThirtyEight, Trump secured 4 swing states, Harris 1, and the remaining 2 states ended in a tie.

Despite the Narrow Polling Gap, Trump's Winning Odds Are Far Ahead in Major Prediction Markets and Betting Sites

As of October 30 local time, the average value calculated from multiple prediction markets and betting sites compiled by RCP shows Trump's winning odds at 63.1%, while Harris's are only 35.8%.

Winning odds for the U.S. election from multiple prediction markets and betting sites and RCP average value screenshot from RCP website

Lü Xiang, an expert on American issues at the Chinese Academy of Social Sciences, believes that polls significantly influence people's betting on gambling. Although Trump has only a slight advantage in the current polls, even a tiny advantage of a fraction of a percent can be magnified when it comes to betting, as "'betting' results can easily become one-sided, which aligns with a naive practice of Bayesian statistical principles."

Observer Network notes that betting related to the U.S. election seems particularly hot this year.

At the world's largest prediction market, Polymarket, bets on the 2024 U.S. presidential election have exceeded $2.7 billion. In August, Bloomberg terminals, widely used in the financial sector, added Polymarket's election odds to their services.

The U.S. has long prohibited citizens from betting on elections domestically, but the restrictions are gradually being loosened.

Polymarket is an offshore prediction market, and although U.S. users are not allowed to bet, many Americans still find ways to use the site. Meanwhile, the U.S. financial trading and prediction market Kalshi has "for the first time provided a legal platform for Americans to bet on the election."

As of the time of writing, bets related to the U.S. presidential election on Kalshi have exceeded $110 million, surpassing the previous expectations of its CEO Tarek Mansour.

Kalshi website screenshot

Opinions vary on how much the political betting market can reflect the true support for each candidate.

Supporters, such as Tesla CEO Musk, believe that "the betting market is more accurate than polls because the stakes are real money." Additionally, experts in market prediction state that such platforms respond to news events much faster than traditional polls.

However, The New York Times points out that the ability of prediction markets to respond in real-time can also be seen as a disadvantage, as quick reactions mean predictions can be more unstable and easily influenced by external factors.

Moreover, opponents also question whether the market could be subject to manipulation.

Bloomberg notes that a small number of users can have a significant impact on the results in prediction markets. For example, since October 7, four accounts associated with the same French citizen have been very active, collectively betting $28 million on Trump. According to the holdings as of October 25, if Trump wins, these accounts would receive $46 million in payouts.

On the Polymarket platform, Trump's and Harris's winning odds were evenly matched in early October, but Trump's odds have since surged.

Trend of Trump's and Harris's winning odds on the Polymarket platform

The Washington Post states that traders and industry professionals generally acknowledge that participants in political prediction markets do not represent American voters, as they tend to skew male and conservative.

In Addition to the Betting Market, the Stock Market Also Seems to Be Betting on Trump

Since October, "Trump concept stocks" such as Trump Media & Technology Group (DJT), Phunware (a software company that collaborated with Trump's 2020 campaign), and the conservative video site Rumble have collectively strengthened.

DJT is the parent company of Trump's self-created social media platform Truth Social, and Trump owns nearly 57% of DJT's shares. As of October 29 local time, its stock price has soared 324% from a recent low on September 24, with a market value climbing to $10.3 billion, surpassing Musk's X platform.

Stock price trend of Trump Media & Technology Group (DJT) over the past 6 months

Lü Xiang believes that the performance of Trump concept stocks is "not surprising; Trump is currently on a strong electoral momentum, and it is normal for the stock prices of his companies to rise." He also mentioned that Trump promised to reduce taxes for individuals and businesses if elected. The proposal to lower corporate taxes may benefit corporate profits, hence seen as good news for the U.S. stock market by many analysts.

Why Are Polls Almost "Tied" in the Final Stage?

The market is fervently betting, and Lü Xiang states, "This is understandable, but it shouldn't be taken too seriously. Currently, the objective references are, on one hand, the polling data, and on the other hand, the intuitive performance of the two candidates."

He believes that Trump has a slight edge now, but it is not a decisive advantage; Harris's performance in recent months has also been commendable, bringing the Democratic Party from a seemingly "certain loss" in June and July to a situation where both sides "have a chance to compete."

On June 27, current U.S. President Biden and Trump held the first debate for the 2024 presidential election. Public opinion generally considered Biden's performance poor, leading to a surge of calls for him to withdraw, and subsequently, his polling data worsened, with swing state voters shifting towards Trump. On July 21, Biden announced his withdrawal and expressed support for Harris as the Democratic presidential candidate.

"This indicates that the Democratic leadership believes that Biden's chances of winning if he continues to run are very low, and they want to take a gamble by changing candidates," Lü Xiang analyzed.

After Harris entered the race, she temporarily turned the situation around, maintaining an upward trend in her polls in August and September, until the election situation began to weaken in October, with polling showing a downward trend.

Lü Xiang believes that the main reason for this situation is that Harris cannot completely detach her policies from Biden, and therefore lacks clear expressions on key economic and foreign policies.

File photo: Harris and Trump speaking at their respective campaign events Visual China

"For example, inflation is a significant challenge she faces. This issue resonates deeply with the American public, but Harris speaks very vaguely, stating that she will lower the cost of living for the public after taking office, which may make voters feel dishonest. Due to the lack of clear and comprehensive explanations on some key policies, public expectations for her quickly diminished, believing she cannot offer better solutions and is not stronger than Biden."

In addition, Lü Xiang also stated that Harris's choice of running mate, Walz, did not add to her appeal. "Of course, she has her difficulties and limited options. However, her choice of a running mate from Minnesota also shows that her election strategy is defensive rather than aggressive."

Although Harris's polling data declined in October, the overall polling results for both candidates and their support rates in swing states remain close, making the upcoming election results in swing states still crucial.

Polling situation in U.S. swing states from RCP and 538 website screenshots

"Interestingly, this year, the well-known polling companies have released fewer data on swing states than in previous elections, so the results are still unclear," Lü Xiang said. At this point in the election, even if there are numbers in the polls, if there is no significant gap, especially if the average hovers around the zero line, it is difficult to make a judgment, and one can only wait for Election Day to see the vote counts in each state.

At a Critical Moment, Why Are Mainstream U.S. Media "Staying Neutral"?

At this critical moment when both sides are locked in a tight race, mainstream U.S. media outlets such as The Washington Post, Los Angeles Times, and USA Today suddenly announced their "neutrality," no longer "endorsing" any presidential candidate.

Analysts believe that the media's "staying neutral" approach also reflects the intensity of this year's U.S. election. As political polarization in the U.S. becomes increasingly severe, mutual attacks between the two parties have escalated, even threatening retribution after the election.

On the 28th local time, Jeff Bezos, the owner of The Washington Post, founder of the American internet giant Amazon, and billionaire, published a signed article titled "The Harsh Truth: Americans Do Not Trust News Media."

"Endorsing a presidential candidate will not change the balance of the election," Bezos wrote. For example, in the "battleground state" of Pennsylvania, no undecided voter will follow a media outlet's "endorsement."

"Endorsing a presidential candidate actually creates a bias, a sense of interference. Ending (this tradition) is a principled and correct decision," Bezos wrote, especially in a time when Americans are increasingly distrustful of the media.

Some opinions suggest that Bezos's last-minute "withdrawal" is to appease Trump, who may become president, to protect his business interests.

American billionaire Jeff Bezos Visual China

This speculation is not unfounded. Just hours after The Washington Post announced its decision to abandon "endorsement," Trump met with executives from Bezos's Blue Origin company. Blue Origin is a commercial space company founded by Bezos.

U.S. media mentioned that Trump previously threatened that if he returned to the White House, he would use government power to crack down on "media that report dishonestly and falsely on people, events, and issues."

Lü Xiang pointed out that industrial policy has a significant impact on large American companies, and entrepreneurs like Bezos and Musk cannot ignore this aspect. He believes that "Musk's strong support for Trump in this election may not be because he likes Trump so much, but because he hopes that Trump's policies in the future will not harm his industries too much."

When Trump was president, Musk was one of his critics. In 2022, Musk stated that he had voted for Democrats in most cases but planned to vote for Republicans next. This year, he established the "American Political Action Committee" to support Trump's campaign, having provided at least $75 million in funding to the organization so far.

Some analyses point out that Musk's "defection" has multiple reasons: Musk has a series of businesses involving satellites, electric vehicles, brain chips, and AI robots, which heavily rely on federal government contracts and regulations. The Biden administration has been quite cold towards him over the past four years. Additionally, Tesla does not form unions, while auto manufacturing unions are a Democratic stronghold. Biden publicly supports General Motors and Ford in developing the electric vehicle industry but "neglects" Tesla, which Musk is extremely dissatisfied with.