In the wake of Donald Trump’s blowout victory amid the bright lights of the Las Vegas strip, the money has been piling on the billionaire businessman from New York to sweep all aside on the way to a coronation at the Republican convention. But just how smart is this money?
After all, Trump was also favourite to win the Iowa caucuses, not only in the betting markets but also in the polls and the pundits’ conventional wisdom. In the event, he lost Iowa to Ted Cruz, the arch-conservative senator from Texas.
He also only narrowly bested Senator Marco Rubio of Florida, who was suddenly being talked about as the main contender for the nomination – heralding a volatile period that sent the markets haywire.
It seems absurd that Rubio could vault past Trump after placing behind him, but that’s down to a little thing called the expectations game. If you can deflate expectations and come third, that’s somehow seen as better than attracting high expectations and coming second. It may not do much for you in the Olympics, but it matters a lot in politics.
It worked for Rubio until a fateful pre-New Hampshire debate encounter with New Jersey governor, Chris Christie. In a calamity that’s been compared to a scene from The Stepford Wives where a suburban woman suffers a circuitry meltdown, revealing her to be a robot, Rubio haplessly began repeating the same scripted attack on Barack Obama over and over again.
He promptly plummeted in the betting markets’ estimation, and eventually finished a poor fifth in New Hampshire. In his concession speech, he admitted that he had malfunctioned during the debate, but promised that systems were now restored and that no further meltdown would occur.
He seems to have been true to his word, but the drubbing Trump dealt him in the subsequent South Carolina primary suggested that the damage had already been done. Even so, Rubio’s stock had shown remarkable resilience in the betting, vying pre-Nevada with Trump for the shortest odds in the nomination market.
Ted in the water
Meanwhile, Cruz – who won Iowa against the odds – has lengthened to odds usually indicative of someone with no chance at all. Why so? After all, he only narrowly lost the runner-up slot in South Carolina to Rubio, and performed similarly in Nevada. He also has plenty of money on hand. Part of the reason is that he’s losing against Trump among his own base of arch-conservative religious evangelicals – and was unable to beat Rubio even in South Carolina, whose demographics should have made it prime Cruz territory.
The Cruz brand has also earned something of a reputation for dirty tricks. On the night of the Iowa caucuses his team spread rumours that rival candidate Ben Carson was bowing out of the race. Before South Carolina, the campaign clumsily photoshopped Rubio’s onto someone else shaking hands with Obama at the White House. Most recently, they released a video in which subtitles over Rubio’s slightly garbled speech suggest he was mocking the Bible, when in fact he did the exact opposite.
So where can Cruz go? Home to Texas, where he’ll be hoping for a very strong showing when the state holds its primary on March 1. He’ll need to win big to change the betting markets’ mind: they put his odds of clinching the keys to the White House at as long as 150-to-1.
On with the show
With Nevada out of the way and the Trump campaign in full swing, the markets see the future pretty clearly.
Trump is now trading at short odds on (2-to-5) to win the Republican nomination, while Rubio is available at about 3-to-1 against. That makes Trump the roughly 7-in-10 favourite to become the Republican standard-bearer for the general election, with Rubio’s chances about 1-in-4.
The odds have been shuffled on the Democratic side too. The “Bern” that Bernie Sanders was feeling after routing Hillary Clinton in New Hampshire was reduced to something of a fizzle in Nevada, where she beat him by a comfortable five points. Nevada’s caucuses resolve ties by means of a card draw. At one deadlocked caucus in the town of Pahrump, an ace was drawn for Clinton against a six for Sanders, an apt representation of the night he had.
Sanders now faces Clinton in South Carolina, where she’s the heavy favourite. She’s also now a best priced 1-to-6 to secure the nomination, as a slew of southern and western states expected to fall to her line up to vote in the next three weeks. She is currently the odds on favourite (4-to-5) to win the presidency.
And so they all march on to Super Tuesday, when an array of states large and small will make their decisions – and potentially scramble the odds once again.
Professor Leighton Vaughan Williams
Director of the Betting Research Unit and Political Forecasting Unit
Nottingham Business School
This article was originally published by The Conversation