Former Vice President Joe Biden has retaken the momentum among political bettors, with investors increasingly persuaded the Democratic nominee will prevail in his bid to deny President Donald Trump a second term after a fiery presidential debate.
In line with public opinion polls showing Biden consolidating his support among the electorate, a snapshot of predictive markets on Wednesday reflected the growing belief that the Democrat not only prevailed in his first face-to-face match up with the president, but is poised to win in November.
Smarkets data pegged Biden’s odds at 62%, with Trump’s chances dwindling proportionately, to 38% —a sharp reversal of the momentum the president demonstrated just before Labor Day.
Meanwhile, U.K.-based Oddschecker found that the former VP’s implied probability has shot up to over 58% while Trump’s has fallen to around 42% — the market’s biggest swing since April. And Bookies.com showed Biden’s odds improving immediately following the raucous debate, in which both candidates took pointed shots at each other.
As a result, several observers now think Biden’s coattails are long enough to pull off a sweep of the Senate — putting the levers of Washington entirely under Democratic control. Smarkets estimates that outcome at 60%, which would diminish anxiety surrounding a contested campaign that drags on beyond November.
As the incumbent, Trump has certain advantages to his credit. However, even as the economic rebound from the COVID-19 pandemic continues apace, the president has come under withering criticism for his management of a crisis that’s claimed over 1 million lives worldwide.
The halting recovery has been made more uncertain by a resurgence in coronavirus infections, widespread social unrest and deadlocked talks on new stimulus. Trump entered the debate on the defensive, and the event descended into chaos amid the president’s testy exchanges with both Biden and the moderator.
“The advantage was Biden’s to lose and there were fears from a Democratic perspective that a bad performance would play into President Trump’s hands,” said Sarbjit Bakhshi, Smarkets’ head of political markets.
Yet Biden’s steady performance — a sentiment echoed by a focus group run by prominent Republican pollster Frank Luntz — “seems to have inspired some faith in Biden amongst customers on Smarkets,” Bakhshi added.
The chaotic aftermath of the COVID-19 pandemic, combined with months of protests against social injustice, inverted what was once Trump’s strongest incumbent asset: A strong economy and a stunning rebound on Wall Street from a deep sell-off in March.
Indeed, that became a flashpoint in Tuesday’s debate, with Trump attempting to link left-wing activist group Antifa to Biden — only to stumble badly when asked to denounce the Proud Boys, a male, far-right group associated with white supremacy.
However, the economy, which remains surprisingly durable in the face of the COVID-19 crisis, may yet bolster the president. The economy created a robust 1.37 million jobs in August, and stock markets, while highly volatile, are still in an upswing. Simultaneously, the government-backed search for a coronavirus vaccine may yield fruit before year’s end.
Just a month ago, that backdrop had helped Trump quietly retake the offensive in several key swing states, according to a Real Clear Politics average.
“With two more debates to go, traders will be factoring in an estimation of Biden’s stamina as to whether he can hold the line against Trump’s attacks, knowing that if he falters, he could end up boosting the president’s hopes of a second term,” Bakhshi said.
Javier David is an editor for Yahoo Finance. Follow him on Twitter: @TeflonGeek