With the Iowa caucuses complete and the 2008 elections taking a stranglehold on the front-page news (aside from Britney Spears' most recent meltdown), it's important to track what the prediction markets are telling us about who and what party will come out as winners in November. The Presidential Election Cycle and the person and parties holding office affect the stock market, and Bespoke will be providing analysis on the relationship between politics and the markets throughout the year.
So who are people putting their money on now that Iowa is over? Below we highlight a number of charts that track the historical political contracts traded at Intrade, the prediction markets leader.
Current odds are for the Democratic party to sweep the '08 election. Futures contracts are predicting a 60.1% chance that a Democrat will win the Presidential election, an 89.7% chance that the Democrats will control the Senate, and an 84.1% chance that the Democrats will control the House. With this strong of a lead, it would be wise for individuals to start preparing themselves for big changes at this time next year.
Although prediction markets favor a Democratic President, we still highlight the fates of the Republican candidates. As the historical prices for the candidates show, there have been large swings in the last year. After Romney's loss yesterday (even though it was widely predicted), he has fallen to fourth place of the top four candidates on Intrade with odds of 14.3%. McCain, who was all but counted out just a month ago, has taken the lead for the Republican nomination at 32.7%! Giuliani is second at 26.1% and Huckabee (although he won Iowa) is third at 17.4%. Many political pundits remarked that last night's GOP results were a win for McCain, even though he finished tied for third with Thompson. The prediction markets confirm McCain's victory.
And since a Democrat is expected to become the next President, the most important contract is who will win the Democratic nomination. The Oprah Effect has helped Barack tremendously, as his odds have gone from the low teens all the way up to 45% in the past two months. Surely Ms. Winfrey deserves a spot in Obama's cabinet should he be elected. For now though, Hillary remains in the lead at 51.9%, although Iowa caused a large convergence.
As it stands now, the money is on Hillary Clinton to be our President in 2009, with Democratic control of the House and Senate. Will this be good or bad for the stock market? Let us know in the poll below.
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