Standard Chartered: What Are Election Markets Saying About Asset Prices?

Standard Chartered find that "online election market probabilities of a Biden over Trump victory are closely linked to polling margins in battleground states, rather than national polls. This helps explain the divergence of online market Biden-Trump odds from pollsters. Participants in online markets may be assuming that the smaller number of key state polls carry more information than national polls. Higher Trump odds of winning the presidency are associated with higher equity prices, but we do not find much of a correlation with the USD or bonds yields, although political outcomes could affect USD and bond yields indirectly thought the effect on equities. We suspect that the election impact will get stronger as we gain more clarity on whether the election outcomes are likely to be contested or not, and the tax and regulatory policies that Biden will follow if he is elected."