As U.S. election odds narrow, market analysts factor in higher risks

In this news, we discuss the As U.S. election odds narrow, market analysts factor in higher risks.

LONDON / NEW YORK (Reuters) – A higher risk of a division of the US Congress and contested elections is factored into some market analysts’ models after some presidential election odds have narrowed.

European betting exchange Paddypower said on Wednesday that while Biden was clearly “betting” to win, in recent days “punters have started backing Trump again.”

According to Real Clear Politics’ presidential election results, betting on odds from September 30 to October 12, the likelihood of Biden winning has increased, but has recently declined.

Paddypower gives Biden more than a 60% chance of winning, against Trump about 40%, and says the odds have narrowed.

JPM analysts said in a note Tuesday that risk markets in the first two weeks of October were supported by a widening of U.S. presidential ratings, implying a lower likelihood of a close or contested election, but over the past week, those odds have started to decrease. again.

This could put pressure on risky markets with negative implications for the so-called “value swap,” which sees a steepening yield curve and a forward shift towards traditional cyclical stocks like banks, analysts said. JPM.

Brown Brothers Harriman said in a note on Wednesday that with Senate oversight “very much at stake there is still a good chance that we will get the most budgetary conservative outcome for this election,” with the chance of a victory for Biden with a Republican Senate. and no major stimulus package after the elections.

RBC equity derivatives strategist Amy Wu Silverman wrote last week that the options market may have “gone too far the other way” in pricing a blue wave and is undervaluing the possibility of a Trump victory.

The prediction odds here on US Senate control show that while the odds of a Democratic Senate outweigh those of Republicans, the odds of GOP control have increased slightly recently.

Reporting by Thyagaraju Adinarayan and Megan Davies; Editing by Nick Zieminski

Original © Thomson Reuters

Originally posted 2020-10-22 00:16:09.

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