Beating the Odds: Why Betting on Elections to Profit in Markets Is a Losing Game
-
Betting on election outcomes to profit in markets is extremely difficult, like trying to pick the top 3 horses in a race. You have to predict the winner correctly and that winner has to outperform what the market has already priced in.
-
Markets are already accounting for the probabilities of electoral outcomes. So even if you predict the winner, the market may have already priced that in, yielding no edge.
-
Electoral outcomes don't always translate into economic impacts, as bills still have to pass Congress. So betting on an outcome generating economic impacts requires multiple accurate bets.
-
There is no statistically significant relationship historically between election cycles and market returns that could inform profitable betting. Sound economics and finances drive markets more than politics.
-
Some industries and companies will inevitably be affected by policy changes from an administration or Congressional majority. But betting on those outcomes in advance is still not a winnable bet.