Markets

Michael P. Regan is a Bloomberg Gadfly columnist covering equities and financial services. He has covered stocks for Bloomberg News as a columnist and editor since 2007. He previously worked for the Associated Press.

Markets are obviously jittery at the sudden possibility that a Donald Trump presidency isn't as far-fetched as it previously seemed.

So it looks like a good time to get some counsel from the real experts out there: British bookies. And, well, tighten your chinstraps folks: The pattern of bets looks very similar to what occurred before Britain voted to leave the European Union.

Yes, the odds favor Clinton to win: Trump's odds are currently 5/2 and Hillary Clinton's are 2/5, according to a compilation of various gambling sites done by Oddschecker.com. For you non-degenerate gamblers out there, that means a $2 bet on Trump wins you $5, while a $5 bet on Clinton wins you only $2.

So way more people are betting on Clinton, right? Not at all. The phenomenon is similar to the pre-Brexit action, when the odds favored what most sober-headed pundits believed would be the result: Remain. However, more actual bets were placed on Brexit. The odds reflected how much money was wagered, not how many individual bets were placed. In this case, more money is being bet on Clinton but Trump has attracted a larger number of wagers.

By this (admittedly bizarre) metric,  Trump has been in the lead since March and pulled way ahead last month:

Yuuuuge Wagers
Bets on a Trump presidency have far outnumbered bets placed on Clinton with British bookmakers
Source: Oddschecker.com

All in all, 61 percent of bets on the two candidates have favored Trump but only 40 percent of the combined stakes are riding on the businessman, according to the web site. Yet when assigning an "implied probability" of victory, the web site uses the odds rather than the number of bets. As a result, Clinton's 71 percent implied probability looks similar to what the go-to presidential horse-race site FiveThirtyEight is showing.

But there's no getting around the fact that more bets are being placed on Trump.  He may be catching up by the amount of money as well. On Monday and Tuesday, following the news that the FBI had discovered more e-mails related to a probe of Clinton, 91 percent about 100,000 euros ($111,000) in wagers placed with Irish bookmaker Paddy Power Betfair were for Trump, Bloomberg News reported.

Could these betting trends be foreshadowing a major surprise in the same way they did with Brexit? (Don't even get us started on the weird coincidence that the Clinton campaign slogan "Stronger Together" sounds an awful lot like the Remain slogan "Stronger In.") Ask me again next week.

Certainly, there are reasons to be skeptical. The customers of the British bookmakers surveyed by Oddschecker are obviously likely to be less familiar with the American political climate than they were with the temperature of British nationalism before the Brexit vote. And maybe the pre-Brexit betting tally was just a coincidence.

Yet there's something extremely intriguing about data based on money placed at risk. The same could be said of the markets this week:  The S&P 500 is poised to drop for a seventh straight day, something it hasn't done since 2011.  The VIX index of implied volatility in the equity market has surged almost 50 percent in the same time frame.

Trump Effect
The VIX index of implied equity volatility has surged as Donald Trump's poll ratings climbed
Source: Bloomberg data

Gambling sites like Oddschecker aren't likely to put sites like FiveThirtyEight and Real Clear Politics out of business. Still, we can't quite ignore them. 

And it's impossible to disagree with the conclusion at Oddschecker: "What’s fascinating is that there is a clear relationship between the betting trends of the upcoming U.S. election and that of Brexit earlier in the year."

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Michael P. Regan in New York at mregan12@bloomberg.net

To contact the editor responsible for this story:
Matthew Brooker at mbrooker1@bloomberg.net