Economics

Financial markets are betting on a Trump victory

Published

5 months ago

November 4, 2024

THE FINAL election polls have been published, and in-person voting has yet to conclude. It is an anxious period, with little new information to parse about who might emerge victorious as America’s next president. But that is not stopping investors from placing, and adjusting, their bets. From prediction markets to bonds, they have more ways than ever to register their views about the likely outcome of the election. Most of their money is on Donald Trump, though his perceived lead over Kamala Harris has narrowed in the past few days.

The easiest place to get a read on the thinking of punters is in election-betting markets. The three that get the most attention are Polymarket, Kalshi and PredictIt. Polymarket, a cryptocurrency-based platform that bills itself as the world’s biggest prediction market, gives Mr Trump a roughly 60% chance of winning the election, as of Monday afternoon in America. That is down from 67% last week, a shift that came after a few late polls—notably, the surprising Selzer poll in Iowa—were more positive for Ms Harris. But Polymarket has plenty of critics, with some arguing that its pricing is easily manipulated.

By contrast, PredictIt, the oldest of the three online betting markets, founded exactly a decade ago, has Ms Harris ahead by the slimmest of margins. But it is also the most limited of the platforms, by design, with strict caps on the number of bettors and the size of their bets. Kalshi, a regulated exchange, comes just about down the middle. It currently sees a 56% probability of victory for Mr Trump, down from 65% last week. In the immediate aftermath of the Selzer poll, Kalshi in fact briefly showed that Ms Harris was the favourite before shifting back in Mr Trump’s direction.

It may seem easy to dismiss these various platforms as silly betting arenas for punters, dominated by young men who spend many of their waking hours online. It is striking, however, that their pricing has closely mirrored “real money” in more established markets. To get a sense of how equity investors are positioned for the election, analysts at Piper Sandler, an investment bank, created two separate portfolios of stocks whose fortunes may rise or fall depending on the presidential victor. Their Trump portfolio features oil companies and weapons manufacturers, plus shorts on firms such as Apple that would be hurt by a trade war with China. Their Harris portfolio is heavy on producers of renewable energy and electric vehicles, while betting against financial firms and drug makers that may face more rules under Democrats.

The performance of the Piper Sandler portfolios lines up almost perfectly with the Polymarket odds. In October, as the betting markets turned against Ms Harris, the Trump portfolio gained about 3% and the Harris portfolio fell by 7%. But over the past week, that gap has closed. For instance, Geo Group, a prison operator in the Trump portfolio, has come under selling pressure, while First Solar, a solar-panel manufacturer in the Harris portfolio, has climbed higher. Citrini, a research firm, has yielded similar results with its Trump-aligned basket of stocks. It soared in July after Mr Trump survived an assassination attempt at a rally in Pennsylvania, tumbled when Ms Harris entered the race and recovered as she seemed to lose momentum. But on Monday, the first trading day after the Iowa poll, Citrini’s Trump basket was down by about 1.4% by the middle of the day.

Election predictions have also had an impact on much bigger, more diffuse markets. Yields on Treasuries and the dollar’s value have climbed over the past six weeks, in part because investors have been girding themselves for a Trump presidency. Their thinking is that his policies, including heftier federal deficits and higher tariffs, are likely to drive up both growth and inflation. Such a backdrop would, in theory, support the dollar and weigh on bond prices, leading to an upward drift in yields. But Monday brought a partial reversal of these trends, with small declines in both yields and the dollar—reflections of Ms Harris’s improved standing in the polls.

What to make of all this trading? One conclusion is that investors are a highly uncertain bunch. Polls have been neck and neck almost the entire race, even as the pricing of election-related trades has swung up and down.

Cutting through that volatility, a second conclusion is that investors have, fairly consistently, been more confident in Mr Trump’s chances than the polls themselves. The Economist’s model, based on polls and fundamental factors, rates the election as a true toss-up. Financial markets—from small-time punters on betting exchanges to the giant institutions that determine the prices of bonds—are closer to 55% in favour of Mr Trump. That is a coin flip but one clearly weighted against Ms Harris.■

Economics

Consumer sentiment tumbles in April as inflation fears spike, University of Michigan survey shows

Published

57 minutes ago

April 11, 2025

Business Finance News

People shop in Bayonne, New Jersey on April 8, 2025.

Charly Triballeau | Afp | Getty Images

Consumer sentiment grew even worse than expected in April as the expected inflation level hit its highest since 1981, a closely watched University of Michigan survey showed Friday.

The survey’s mid-month reading on consumer sentiment fell to 50.8, down from 57.0 in March and below the Dow Jones consensus estimate for 54.6. The move represented a 10.9% monthly change and was 34.2% lower than a year ago.

As sentiment moved lower, inflation worries surged.

Respondents’ expectation for inflation a year from now leaped to 6.7%, the highest level since November 1981 and up from 5% in March. At the five-year horizon, the expectation climbed to 4.4%, a 0.3 percentage point increase from March and the highest since June 1991.

Other measures in the survey also showed deterioration.

The current economic conditions index fell to 56.5, an 11.4% drop from March, while the expectations measure slipped to 47.2, a 10.3% fall. On an annual basis, the two measures dropped 28.5% and 37.9% respectively.

Sentiment declines came across all demographics, including age, income and political affiliation, according to Joanne Hsu, the survey director.

“Consumers report multiple warning signs that raise the risk of recession: expectations for business conditions, personal finances, incomes, inflation, and labor markets all continued to deteriorate this month,” Hsu said.

In addition to the other readings, the survey showed unemployment fears rising to their highest since 2009.

The survey comes amid concerns that President Donald Trump’s tariffs will raise inflation and slow growth, with some prominent Wall Street executives and economists expecting the U.S. could teeter on recession over the next year.

To be sure, the survey’s readings are generally counter to market-based expectations, which indicate little fear of inflation ahead. However, Federal Reserve officials in recent days say they fear that consumer expectations can quickly become reality if behavior changes. Consumer and producer inflation readings this week showed price pressures easing in March.

Also, the University of Michigan survey included responses between March 25 and April 8, the end period coming the day before Trump announced a 90-day stay on aggressive tariffs against dozens of U.S. trading partners.

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Economics

Fed’s Kashkari says rising bond yields, falling dollar show investors are moving on from the U.S.

Published

1 hour ago

April 11, 2025

Business Finance News

Fed's Kashkari: Falling dollar lends credibility to story of investor preferences shifting

Minneapolis Federal Reserve President Neel Kashkari said Friday recent market trends show investors are moving away from the U.S. as the safest place to invest while President Donald Trump’s trade war escalates.

With Treasury yields rising and the U.S. dollar sagging against its global counterparts in recent days, the trends are running counter to what you might normally see, the central bank official said during a CNBC “Squawk Box” interview.

“Normally, when you see big tariff increases, I would have expected the dollar to go up. The fact that the dollar is going down at the same time, I think, lends some more credibility to the story of investor preferences shifting,” Kashkari said.

The 10-year Treasury yield has surged this week after Trump announced his intention to slap a 10% across-the-board tariff against U.S. trading partners and threatened to impose even harsher select levies before backing down Wednesday.

At the same time, the greenback has slumped more 3% against a basket of global currencies, with moves potentially signifying a turn away from safe-haven U.S. assets.

“Investors around the world have viewed America as the best place to invest, and if that’s true, we will have a trade deficit. So now one of the ways that expresses itself is in lower yields across asset classes in America,” Kashkari said. “If the trade deficit is going to go down, it could be that investors are saying, OK, America no longer is the most attractive place in the world to invest, and then you would expect to see bond yields go up.”

Kashkari noted, however, that he is seeing “stresses” but not significant dislocations in market functioning.

Kashkari does not vote this year on the rate-setting Federal Open Market Committee but will vote in 2026. He noted that his focus in the current environment is on keeping inflation expectations anchored, echoing other policymakers’ statements that rates are unlikely to move until there is clearer visibility on fiscal and trade policy.

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Economics

Wholesale inflation March 2024:

Published

2 hours ago

April 11, 2025

Business Finance News

Wholesale prices unexpectedly fell in March, setting up a favorable inflation backdrop as President Donald Trump began intensifying tariffs against U.S. trading partners, the Bureau of Labor Statistics reported Friday.

The producer price index, considered a leading indicator for pipeline inflation pressures, declined a seasonally adjusted 0.4% for the month, after rising 0.1% in February. Economists surveyed by Dow Jones had been looking for an increase of 0.2%.

Excluding food and energy, so-called core PPI also declined, down 0.1% against the estimate for a 0.3% increase. The index less food, energy and trade services increased 0.1%.

More than 70% of the slide in final demand prices came from a 0.9% tumble in goods prices, a key measure as policymakers look for inflation drivers. Services prices also pulled back, falling 0.2%.

Nevertheless, the indicators showed inflation still holding above the Federal Reserve’s 2% target.

Headline PPI showed a 2.7% 12-month rate while the index excluding food, energy and trade services was at a 3.4% rate.

Moreover, March inflation measures will be considered somewhat stale considering the uncertainty behind Trump’s trade policy. The president slapped a broad 10% levy against all imports while also revealing a menu of individual duties against dozens of other trading partners. Trump on Wednesday backed off what he termed “reciprocal” tariffs, instituting a 90-day negotiation period in an effort to reduce the U.S. trade deficit.

The BLS on Thursday also reported that consumer prices pressures were easing, down 0.1% for a headline rate of 2.4% and a core reading of 2.8% that was the lowest in four years.

This is breaking news. Please check back for updates.

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