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Financial markets are betting on a Trump victory

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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

The pivotal February jobs report is out Friday. Here’s what to expect

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People walk past digital billboards at the Moynihan Train Hall displaying a new initiative from New York Governor Kathy Hochul titled ‘New York Wants You’, a program designed to recruit and employ displaced federal workers across New York State, in New York, U.S., March 3, 2025. 

David Dee Delgado | Reuters

Mixed signals lately from the labor market are adding to angst for investors already on a knife’s edge over the potential threat that tariffs pose to inflation and economic growth.

Depending on the perspective, employers either are cutting workers at the highest rate in years or skating by with current staffing levels.

What has become clear is that workers are increasingly uncertain of their employment status and less prone to seek other opportunities, at the same time as job hunters are reporting it harder to find new positions, according to several recent surveys.

The sentiment indicators counter otherwise solid numbers showing up in more traditional data points like nonfarm payrolls growth and the jobless rate, which is still at a level historically associated with full employment and a bustling labor market.

Sound fundamentals

“Fundamentally speaking, things are still relatively sound in the United States. That doesn’t mean there are no cracks,” said Tom Porcelli, chief U.S. economist at PGIM Fixed Income. “You can just whistle past that and just hang your hat on the payrolls report, or recognize that the payrolls report is a lagging indicator and some of those other indicators that give you a better flavor of what’s happening under the surface are looking softer by comparison.”

Markets will get another snapshot of labor market health when the Labor Department’s Bureau of Labor Statistics releases its February nonfarm payrolls report Friday at 8:30 ET. Economists surveyed by Dow Jones expect growth of 170,000 jobs, up from 143,000 in January, with the unemployment rate holding steady at 4%.

While that represents a stable labor market, there are a number of caveats that point to more difficult times ahead.

Outplacement firm Challenger, Gray & Christmas reported Thursday that layoff announcements from companies soared in February to their highest monthly level since July 2020. A big reason for that move was the effort by Elon Musk’s Department of Government Efficiency to cull the federal workforce. Challenger reported more than 62,000 DOGE-related cuts.

DOGE actions as well as other labor survey indicators showing worker angst likely won’t be reflected in Friday’s jobs number, primarily due to the timing of the cuts and the methodology the BLS uses in its twin counts of household employment and jobs filled at the establishment level.

Consumer confidence drop

But a recent Conference Board report showed an unexpectedly large drop in consumer confidence that coincided with a spike in respondents expecting fewer jobs to be available as well as harder to get. Similarly, a University of Michigan’s survey saw a slide as respondents worried about inflation.

In the world of economics, such fears can quickly become self-fulfilling prophecy.

“If workers don’t feel confident that they’re going to be able to find a new job … then that’s going to be reflected in the economy, and the same in terms for how willing employers are to hire,” said Allison Shrivastava, economist at the Indeed Hiring Lab. “Don’t ever discount sentiment.”

In recent days, economists have been ramping up the potential impact for DOGE cuts, with some saying that multiplier effects involving government contractors could take the total labor force reduction to half a million or more.

“They’re going to have some trouble being reabsorbed into the economy,” Shrivastava said. “It also does shake people’s confidence and sentiment, which can certainly impact the actual economy.”

For now, Goldman Sachs said the DOGE cuts probably will lower the headline payrolls number by just 10,000 or so and exepcts weather-related impacts to be small. Overall, the bank said the current picture, according to alternative figures, is one of “a firm pace of job creation, and we expect continued, albeit moderating, contributions from catch-up hiring and the recent surge in immigration.”

In addition to the employment numbers, the BLS will release figures on pay growth. Average hourly earnings are expected to show a 0.3% monthly gain, up 4.2% from a year ago and about 0.1 percentage point above the January level.

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Economics

Treasury Secretary Bessent says the American dream is not about ‘access to cheap goods’

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Scott Bessent, US treasury secretary, during a Bloomberg Television interview in New York, US, on Thursday, Feb. 20, 2025. 

Victor J. Blue | Bloomberg | Getty Images

Treasury Secretary Scott Bessent on Thursday offered a full-throated defense of the White House’s position on tariffs, insisting that trade policy has to be about more than just getting low-priced items from other countries.

“Access to cheap goods is not the essence of the American dream,” Bessent said during a speech to the Economic Club of New York. “The American Dream is rooted in the concept that any citizen can achieve prosperity, upward mobility, and economic security. For too long, the designers of multilateral trade deals have lost sight of this.”

The remarks came with markets on edge over how far President Donald Trump will go in an effort to attain his goals on global commerce. Stocks fell sharply Thursday despite news about some movement from the administration on Mexican imports.

In a speech delivered to a crowd of leading economists, Bessent indicated that Trump is willing to take strong measures to achieve his trade goals.

“To the extent that another country’s practices harm our own economy and people, the United States will respond. This is the America First Trade Policy,” he said.

Earlier in the day, Commerce Department data underscored how far the U.S. has fallen behind its global trading partners. The imbalance swelled to a record $131.4 billion in January, a 34% increase from the prior month and nearly double from a year ago.

“This system is not sustainable,” Bessent said.

Commerce Secretary Howard Lutnick: Tariff revenues will reduce the deficit & help balance budget

Economists and market participants worry that the Trump tariffs will raise prices and slow growth. However, White House officials point out that tariffs did little to stoke inflation during Trump’s first term, touting growth potential from reshoring as companies look to avoid paying the duties.

“Across a continuum, I’m not worried about inflation,” Bessent said. He added that Trump considers tariffs to have three benefits: as a revenue source with the U.S. running massive fiscal deficits, as a way to protect industries and workers from unfair practices around the world, and as “the third leg to the stool” as Trump “uses it for negotiating.”

Thursday’s talk was hosted by Larry Kudlow, the head of the National Economic Council during Trump’s first term.

In addition to discussing tariffs, the two chatted about deregulation as well as the onerous debt and deficit burden the government is facing. The budget is already $840 billion in the hole through just the first four months of fiscal 2025 as the deficit runs above 6% as a share of gross domestic product, a level virtually unheard of in a peacetime, expansionary economy.

“This is the last chance bar and grill to get this done,” Bessent said of imposing fiscal discipline. “Everyone knows what they should do. It’s, do they have the willpower to do it?”

Bessent also advocated a deep examination of bank regulations, particularly for smaller institutions, which he said are burdened with rules that don’t help safety.

As Bessent spoke, stocks added to losses in what has been a tough week for Wall Street.

“Wall Street’s done great, Wall Street can continue doing well. But this administration is about Main Street,” he said.

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Economics

Andrew Cuomo plots a comeback in New York

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Political disgrace isn’t as constraining as it used to be. Andrew Cuomo, whose public career was thought to be dead just three years ago, is back in the spotlight as a candidate for mayor of New York City—and he is topping polls. Mr Cuomo resigned as governor of New York state in August 2021 amid multiple sexual-harassment allegations (which he denied). On March 1st he announced his comeback.

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