Political betting markets are starting to “Feel the Bern” — even if Wall Street isn’t yet convinced the newly minted Democratic frontrunner can actually win the White House.
Investors see an increasing possibility that Vermont Senator Bernie Sanders will prevail in his quest to become the Democrats’ presidential standard bearer, Smarkets data showed on Wednesday.
The odds-making website showed that after a narrow victory in New Hampshire, Sanders has a 37% chance to get the nomination in a field that continues to be winnowed down — but also showed President Donald Trump remains overwhelmingly favored to win reelection.
Greg Valliere, chief policy strategist at AGF Investments, told Yahoo Finance the race wouldn’t likely be clear until Super Tuesday, on March 3, which holds some of the biggest electoral prizes — including California.
The investor said that Wall Street might be pleased with a Sanders win, if for no other reason than he’d likely lose to Trump. Valliere echoed several market watchers who think the Vermont Senator’s far-left platform would make him unelectable.
On Wednesday, all major benchmarks closed at new record highs — underscoring what Valliere characterized as a relief rally.
“I think he’d lose 40 states,” Valliere told “The First Trade.” He added that “with Bernie at the top of the ticket you could see a lot of Democrats lose in House and Senate races. For Wall Street, a Bernie Sanders nomination, in a perverse sort of way, would be a sigh of relief because he can’t get elected.”
Former New York City Mayor Michael Bloomberg is seen by Smarkets investors as the second choice, with around 27% betting he can prevail, with former South Bend Mayor Pete Buttigieg’s chances stable around 14% — even after a controversial Iowa caucus win that gave him a delegate lead.
Minnesota Senator Amy Klobuchar, a self-styled moderate, earned a place on the board by jumping from zero to 5%. However, Klobuchar’s gain may have come at the expense of Joe Biden, whose odds have taken a substantial hit in the wake of his poor showings in both Iowa and New Hampshire: Bettors now see the former Vice President’s chances of a win in the single digits.
That is a stark turnabout from last month, when Biden was perceived as the favorite with 37%. Massachusetts Senator Elizabeth Warren, a firebrand liberal once perceived as a front-runner, has also seen her standing drop precipitously.
“Not only did [Biden] potentially lose votes to Amy Klobuchar yesterday, but market share too, as she has gone from next to zero to 5% overnight,” said Sarbjit Bakhshi, the site’s head of political markets.
“Unless Biden can pull off an amazing comeback in Nevada or South Carolina, it is hard to see how his withdrawal from the race is anything other than inevitable,” Bakhshi added.
Smarkets’ results are consistent with other independent reads on the Democratic nomination that show Sanders vaulting to front-runner status as Biden’s chances grow increasingly dim.
A potentially ‘fatal blow’
Investors have warned that markets aren’t fully prepared for the possibility that the self-described Democratic socialist could take on Trump in the fall — or the impact a Sanders presidency could have on stocks.
After surviving impeachment, political markets are pricing in rising odds that the president prevails over his Democratic challenger next year, even though a centrist like Biden or Klobuchar could make the road tougher.
“The best scenario for Biden would be to emerge from the February contests bloodied but unbowed, which will likely require a close result in Nevada and a win in South Carolina,” said Todd Mariano, a director at Eurasia Group. The firm estimates Sanders has a 35% chance of securing the Democratic nod.
The odds that the former vice president can roar back in Nevada and South Carolina “have dropped but remains on the table. A loss in South Carolina could be a fatal blow,” Mariano added.
Javier David is an editor for Yahoo Finance. Follow Javier on Twitter: @TeflonGeek