Betting markets that for two months favored Democratic presidential nominee Joe Biden over President Trump are watching his lead shrink at a rapidly contracting pace, according to an average of the odds, which Friday gave Biden a 53% chance of winning compared to 47% for Trump.
On the first day of the Democratic National Convention, Biden registered a 15.2-point advantage over Trump, with a 56.9% chance of winning compared to the president’s 41.7%, according to a RealClearPolitics average of betting odds. But gamblers seemed to not like what they saw. His lead fell 1.5 points once the convention ended.
By the start of the Republican National Convention on Monday, Biden held an 11.6-point average advantage. By Friday, this number had fallen by half, with its most dramatic contraction occurring on the final day of the convention when Biden’s lead fell 1.6 points overnight.
Gamblers’ odds of Trump winning the November election outpaced Biden through much of March, April, and May. But a turning point in early June saw their fortunes reverse. On June 2, Biden moved ahead of Trump in the RealClearPolitics average by 1 point, and then began gaining steam.
By the end of the month, Trump’s odds were slashed, and Biden hovered ahead with a lead between 22 and 23 points, on average.
After a brief contraction of these odds in early July, Biden bettors plowed ahead to drive his lead to 24.6 percentage points on Aug. 1, with his odds of winning at 61%, on average, and Trump’s at 36.4%.
Soon after, Trump began to chip away at Biden’s odds.
Forecasters for prediction market website PredictIt “have generally been less bullish on a Biden win than some of the national polls and other major election handicappers (e.g., here and here),” said Will Jennings, a spokesman for the company, in a statement.
Other forecasters have their own odds.
Biden’s at only 55-60% to win in prediction markets, but 85-90% in other statistical models, which seems like an insanely wide spread—and I don’t think either number is super easy to defend—so I have to say I’m pretty happy that 538 model’s falls somewhere in the middle.
— Nate Silver (@NateSilver538) August 26, 2020
??The State of the 2020 Race:
▶️ @FiveThirtyEight average/model: BIDEN +9.3%/73%.
▶️ @PredictIt: BIDEN 59%.
▶️ @Superforecaster: Dem POTUS 77%.
▶️ @TheEconomist EV forecast: BIDEN 89%.— James Pethokoukis (@JimPethokoukis) August 24, 2020
Jennings said the reason for this is difficult to pinpoint but that prediction markets “can price in factors other forecasting methods can’t, such as the potential impact of the pandemic on voter turnout and fears related to the logistics of actually submitting and counting voters’ ballots.”
Markets also do this more quickly, “since people are ‘invested’ in the outcome,” he said. “For example, alongside the conventions and after the tragic events in Kenosha, WI, the odds that Democrats will win Wisconsin have dropped nine percent in the last week, from 66% down to 57%.”
Jennings shared a chart from the Bespoke Investment Group that he said summed up the prediction market response to the conventions and related events from the last two weeks.
“While Biden initially saw a small bump from the Democratic convention, the share price for him winning has since retreated, giving him the most narrow lead he’s had in the market since early June,” he said.
Patrick Flynn, a political analyst for Smarkets, a betting market website, agreed that the race had tightened over the past two weeks.
“Though it is hard to say for certain what is driving changes in the prediction markets, the race has tightened on Smarkets over the course of the party conventions,” Flynn said.
“Trump traded at his highest price since May after his acceptance speech,” Flynn said. According to Smarkets’s “Next President” market, which RealClearPolitics includes in its average, Biden has fallen by 5 percentage points since the start of the Democratic convention.
Biden’s lead has collapsed from a high of 28 percentage points at the start of August to 8 points, Flynn said.
“As of now, our users give the former vice president a 54% chance of winning the presidency to Trump’s 46%,” he continued. “Given how clear and consistent Biden’s lead has been in the national polls over the last few months, it appears that Smarkets users are trading on the belief that the polls will tighten over the final two months of the campaign.”
Biden leads Trump by 7.1 percentage points, according to a RealClearPolitics average of national polls.
