2016-11-02

Email Scandal Saves GOP Congress

The bettors are putting their money back on a GOP-controlled Congress, currently priced above a Democrat-controlled Senate. Prices below are through midnight on November 1.
Trump hit a new high and Clinton a new low in the prediction market:
Few have even thought about what happens if Trump wins and has a GOP Congress. Fewer predicted it. It's possible he will team with the Tea Party members and try to dethrone Ryan as Speaker, and that's only the first potential shock.

I do not believe China will do a surprise devaluation if Trump wins because they will not want to poison the negotiating environment. If they devalue, Trump will definitely label China a currency manipulator and possibly slap tariffs on Chinese goods even before negotiations begin. The repeal and replacement of Obamacare, along with tax reform and border security, will be first on the agenda as well.

I think the trend favors Trump and the polling data is terrible (ABC/Wapo going from +12 Clinton to +1 Trump in one week is ludicrous and indicates major oversampling of Democrats in prior polls). At this point it is his race to lose. The Senate comes down to local polling and it's difficult to say how it shakes out. If there's another bomb to drop on the emails, then a GOP Senate is more likely. Right now the polling has the GOP at 51 Senate seats, losing 3. If Trump wins, I think Indiana will flip and they'll have 52. If Trump wins big, Pennsylvania could hold (currently projected as a loss).

On the other hand, it's still very possible Clinton wins and the Democrats take the Senate. If Clinton is on path to win, the GOP could lose Indiana and Pennsylvania, plus also lose New Hampshire and Nevada and thus the control of the Senate. If Trump pulls in a lot of Democrat voters who vote Democrat in House and Senate races, but turnout for Clinton is high as well, the Democrats could shock and win everything.

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