As the fallout from Brett Kavanaugh’s elevation to the Supreme Court dominates the headlines and narrative, the outcome of November’s mid-term elections remains unpredictable. Few are confidently predicting how the politics of this will play out, and those doubts are feeding into the markets.
Democrats slip back for House majority
From a low of 1.4, Democrats have drifted to 1.6 to achieve their top target – winning a majority in the House of Representatives. Regular readers will know I’ve tipped them several times for that, at an average around 1.81, in expectation of a ‘Blue Wave’. However, I have deliberately swerved betting on the Senate, until now.
The first, essential task when weighing these markets is to understand the rules and maths. In our Senate market, the definition of a ‘majority’ is having 51 of the 100 seats – as opposed to having more than the other party. The current tallies are Republicans 51, Democrats 47. There are two independent Senators, Bernie Sanders and Angus King.
Therefore, the Republicans simply need to come out level on the night to retain their majority. Given an extremely favourable map, they are strong favourites at 1.49 to do so, compared to dismissive odds of 10.0 about a Democrat majority.
In my view the third option ‘No Majority’ is the value bet at [4.2], primarily because it covers numerous permutations and will likely offer good trading potential in the closing stages, or on the night, regardless of either party gaining momentum. Here’s why.