Morgan Stanley: "Given Moves In Prediction Markets, Let Us Frame A President Trump Win Scenario"

By Vishwanath Tirupattur, global head of Quantitative Research at Morgan Stanley

The outcome of the US elections, now just over a week away, has been at the center of every discussion we have had in the last several days. While the latest opinion polls show that the presidential race has tightened and is neck-and-neck in key swing states with poll numbers within the margin of error, in recent weeks some prediction markets have shifted meaningfully toward the Republicans in the contests for the presidency and control of Congress.

Capital markets have broadly aligned with the prediction markets. As reflected in the Republican (MSZZREP) and Democratic (MSZZDEM) baskets we track, stocks exposed to Republican win outcomes have risen.