In a post yesterday, we highlighted the fact that based on trading in the Iowa Electronic Markets (IEM), the odds for the Democratic nominee to win the Presidential election in November were crashing. We pointed out that while other betting markets were moving in a similar direction, they weren’t seeing nearly as sharp a move as the IEM. A case in point is the betting market Betfair. The chart below shows the historical price of the contract for Hillary Clinton winning the November election. Similar to the IEM, Mrs. Clinton’s chances have been declining in the last few weeks, falling from 74.4% in late April to 66.0% today. Unlike the IEM, though, the price decline hasn’t been nearly as sharp and remains comfortably above 60%.
Like our chart of the IEM, in this chart for the Betfair contract, we have also overlaid the performance of the S&P 500 so far this year. Here again, the patterns of both series have been remarkably similar. Tuesday’s rally in equities would suggest to some that either Clinton will see a bounce or the relationship is breaking, but until we can convincingly break that downtrend from the April closing high, the relationship remains intact.