Garbage In, Garbage Out
Markets react fast. Except when they don't.
With less than a week to go, is GarbageGate (or Son of GarbageGate) moving the needle? So far, despite days of breathless coverage - first of comedian Tony Hinchcliffe’s joke about Puerto Rico being a floating island of garbge, then of Biden’s rejoined that the only garbage he sees is Trump’s “supporter’s” (or “supporters” sans apostrophe if you’re skeptical of the White House stenographer’s motives) - the markets are thoroughly unimpressed.
Aside from a brief dip (of around 50 bps) during prime time on Friday, as news coverage and online interest in Hinchcliffe’s routine first spiked, the whole frenzied aftermath has been remarkably useless in battering prices either way, with our aggregate forecast swaying serenely in a band just 2+ percentage points wide ever since, with no meaningful movement even among any constituent markets (hover over the chart above to see which is which).
Lest you chalk it up to prediction markets being unduly sticky or their degenerate participants simply lacking foresight (absent updated guidance from inputs like polls and forecasters), recall their suppleness and lonely forward-lookingness a little earlier this year.
The Trump-Biden debate on June 27 was one of the best opportunities for prediction markets to cover themselves in glory this cycle.
Even as a truly herculean spin operation by the White House and its institutional allies promptly whirred to life and persisted for the next three weeks, traders watching the debate saw the writing on the wall and happily, consistently interpreted it for anyone willing to listen.
Almost immediately, Biden’s reelect price created to under 20% on
(and dove under 10% within a few days), rather unmistakably heralding his doom, whether at the ballot box or the genteel back-room persuasion that eventually brought the President down.
For comparison, judging by poll-driven forecasters like
, the debate was just a flesh wound for Biden, even weeks later (right up until he withdrew).
Even worse, 538 (which seems to have hidden its pre-dropout model output from public view, had Biden literally favored to win as late as July 18.
Look, everyone loves an October surprise - campaigns (one at least), the media, and certainly we electoral popcorn munchers. But this ain’t it.
When an event upheaves the status quo, the market isn’t typically coy about it. There may be whipsawing and second guessing, but what you won’t see is passivitity.
The unusually becalmed state of the presidential prediction markets throughout GarbageGate gives us decent assurance the state of the race is about the same as it was on Friday.
Whatever that may have been.