Forget 2016, in politics the favourite usually wins

After 19 years of following elections since the advent of Betfair, I can safely say there has never been anything like this year’s US election.

Record-breaking election reflects politics

More money traded, likely breaking the all-time record by a factor of 2:1. The biggest bet ever placed – Β£1M on Biden. Deep resistance to opinion polls. With 24 hours to go, virtually no agreement about basic facts between the two sides. It feels more like politics for real than betting.

There have been various explanations for Trump’s popularity in the market, but as Betfair’s exclusive poll of UK voters shows, political support for this US president doesn’t fit. In the UK, 80% of respondents prefer Biden.

2020 narrative is based on 2016

The most logical reason for bettors backing Trump is the events of 2016. Brexit and Trump’s election were extraordinary, historic upsets that totally consumed the news cycle on either side of the Atlantic. Engagement in politics surged, coinciding with a massive growth in political betting.

Moreover new narratives took root. Polls, experts were to be distrusted. They could be dismissed as fake or working on behalf of whichever party they showed ahead. That opposing these experts in the betting would pay off, and the odds were skewed due to the biased media.

Favourites were previously ultra-reliable

None of this ever stacked up. One reason why those two outsiders were such big odds was precisely because favourites had an amazing record. Prior to 2016, every single 100 day favourite in a US or UK election had gone on to win the main market.

Brexit polls weren’t decisively pro-Remain and numerous prominent voices either predicted it or profited from it. The Trump v Clinton misread came less from polls than pundits, including me, mispricing the uncertainty level. Overlooking that there were many more undecideds and third party supporters than usual.

A third upset was to follow at the 2017 UK General Election, when the Tories lost their parliamentary majority. I’d say that was a bigger shock than either Brexit or Trump. Here I explain the common theme running through all three results.

Re-alignment created unpredictability

More widely, we were living through a short era of unpredictability – as explained in this earlier piece. The electorate was re-aligning, based on age, education, values and geography. Social media and micro-targeting transformed information and campaigns.

Those three results remain outliers in US or European politics. Other evidence strongly vindicates both polls and betting.

Recent results reverted to predictable norm

At the 2019 UK Election, the Tory majority was widely expected, in accordance with polls. Over 95% of favourites won in constituencies.

In the USA, we had the mid-term House of Representatives election. Polls were bang on in forecasting a ‘Blue Wave’. ‘Shy Trump voters’ were nowhere to be seen.

Other ‘Alt-Right’ outsiders failed

Favourites won in Europe, too. Emmanuel Macron in France outperformed one-sided polls amid huge turnout. Mark Rutte landed the odds in the Netherlands. So too Angela Merkel in Germany.

Of particular note was the Social Democrats winning most seats at the Swedish election. This was one of my best ever bets. As argued on these pages at the time, every indicator pointed to them comfortably winning most seats. Yet 5/71.7 was available three days out!

What happened? As in all these European elections, the far-right party was massively overstated. The Sweden Democrats were always shunned by rival parties, committed to blocking them via whatever parliamentary coalition they could. They could never win yet were at single-figure odds. Sound familiar?

US voters are generally predictable

The reality is that, apart from 2016, US politics is very predictable. Opinion is so polarised that genuinely persuadable voters are harder to find than perhaps anywhere in the democratic world. It isn’t a hard country to poll.

Don’t fall for recency bias. At the penultimate election, the favourite won in every state. The betting signals for Obama were stronger than polls, arguably reflecting the fixed nature of the US electorate. I think this election – a genuine two-horse race – is far likelier to match 2012 trends than 2016.

Were this sport, a couple of shocks from 2016 would not be talking points. Does anybody say Liverpool or Man City are over-rated in the betting just because Leicester City pulled off an upset for the ages? Of course not.

Follow Paul on Twitter and check out his website, Political Gambler.