The news …
Since the opening of the 2020 U.S. Presidential Vote Share Market contract on 7 February 2019, the Iowa Electronic Markets has Democrats taking the greater share of votes in the November 2020 presidential elections. The purchase price of a win by the Democratic presidential candidate has increased by 15.2%, from $.50 per share on 7 February 2019 to $.576 per share as of 17 June 2019.
Meanwhile, the price of a win by the Republican presidential candidate has decreased by 4.71%, from $.467 per share on 7 February 2019 to $.445 per share as of 17 June 2019.
With just over 16 months left until the general elections, there is still time and opportunity for changes in these prices, driven particularly by who is chosen by the Democratic party to vie for the presidency. During this time period the expected Republican nominee, President Donald Trump, will be expected to work on the negative aspects of his narrative given his unpopularity among the American electorate. Here are some negative factors that traders in the political prediction markets should expect to see Mr. Trump to make an effort to improve on.
Mr. Trump’s overall approval rating and the areas he has to target….
After 860 days in office, Mr. Trump’s approval rating is at 40%, according to Gallup poll data. But as Shannon Pettypiece and Mike Dorning point out in a piece for Bloomberg, no president since 1952 has won re-election polling under 48%. Mr. Trump, according to the article, has never polled above 46%.
To start driving up the value of his electoral stock, Mr. Trump’s management team will have to reassure farm states like Iowa that his trade policies will eventually pan out for them. Politic prediction market traders should be concerned if they see no movement in this area.
Another area, more along the line of political optics, is Mr. Trump’s activity on Twitter. As Ryan Girdusky notes, Mr. Trump’s addiction to Twitter is “toxic.” Both Democrats and Republicans want Mr. Trump to stop using the micro-blog service. His detractors and some of his supporters express that Mr. Trump’s Twitter activity makes him look petty. Mr. Trump pushes back on this argument by asserting that social media is an effective way of communicating his policy positions.
Traders should be looking for changes in this political behavior over the next few months as the change in optics may be reflected in prices.
Mr. Girdusky also adds that Mr. Trump has a media problem and that whether stories are true or baseless, the media paints him as corrupt, incompetent, or both. Mr. Trump’s activities feed this perception.
While the economy is strong, with unemployment falling below the historic full employment rate of four percent, the 2017 tax cut that Mr. Trump credits with spurring economic growth is viewed as unpopular by most Americans, writes Ben White of Politico. The majority of Americans don’t believe they benefited from tax relief under the law. Again, Mr. Trump will have to use the next few months persuading the American public that their perception is wrong.
One last area traders will have to look for movement on by the Trump team is the President’s perceived embrace of bigotry. Marc Thiessen raises the point that the public is not enthused by the Trump administration’s policy of separating children from their families. In addition, Mr. Trump has, according to Mr. Thiessen, not done enough to separate himself from “ethno-nationalists.”
Searching for the “surprise”….
The new information that traders should be looking for is political behavior on the part of the Trump campaign that seeks to turn the above negative factors onto positive ones; that describe the factors either as strengths or transmitting benefits to the electorate. Mr. Trump will have to be seen as spinning these narratives into political packages the electorate is willing to purchase with the vote.