{"id":214064,"date":"2024-10-22T12:06:43","date_gmt":"2024-10-22T16:06:43","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=214064"},"modified":"2024-10-25T10:33:30","modified_gmt":"2024-10-25T14:33:30","slug":"forecast-contracts-wide-deficits-to-continue-under-both-candidates","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/forecast-contracts-wide-deficits-to-continue-under-both-candidates\/","title":{"rendered":"Forecast Contracts: Wide Deficits to Continue Under Both Candidates: Oct. 22, 2024"},"content":{"rendered":"\n

Market participants are coming to the realization that the US\u2019s fiscal situation won\u2019t be solved by the next administration, whether it\u2019s Trump or Harris. Furthermore, proposals on both sides of the aisle have been labeled as inflationary, at times because they\u2019re too expensive from a budgetary standpoint or highly restrictive of global trade. Investors have responded by purchasing Yes Forecast Contracts<\/a> regarding the growing national debt as well as scooping up gold bars while they unload duration from their portfolios. Indeed, the Fed\u2019s 50-basis point jumbo rate reduction on September 18 served to send yields north, and not south, which was largely expected. Folks are worried about price pressures down the road, as well as unsustainable revenue and spending dynamics in Washington. Stocks, meanwhile, are beginning to pay attention to these risks, as traders scoop up volatility protection across the curve while they modestly unload shares. On the one hand, equities are priced nominally and serve as a hedge to loftier inflation, but taller long-term yields complicate the valuation conversation.<\/p>\n\n\n\n

\"Treasury<\/figure>\n\n\n\n

Forecast Traders Project Fiscal Mismanagement<\/strong><\/h2>\n\n\n\n

IBKR Forecast Traders<\/a> believe there\u2019s no end in sight to fiscal mismanagement, with players anticipating debt loads in excess of $38 trillion and $61 trillion by the end of fiscal years 2025 and 2035. The Yes choices, which closely reflect implied probabilities, are priced at $0.52 and $0.66. And while Democrats generally think that the answer is higher tax burdens, Republicans prefer to grow out of these debt problems via pro-growth policies. But ladies and gentlemen, the longer we continue on this road, the narrower and narrower the path becomes for solutions across party lines.<\/p>\n\n\n\n

\"National<\/figure>\n\n\n\n
\"National<\/figure>\n\n\n\n

Source: ForecastEx<\/em><\/p>\n\n\n\n

Traders Increasingly Point to a Trump Win<\/strong><\/h2>\n\n\n\n

Meanwhile, IBKR Forecast Trader contracts are increasingly pointing to Donald Trump securing the Oval Office, while polling results continue to underscore the importance of swing state votes, including the need for his competitor, Kamala Harris, to win Pennsylvania. The Forecast Trader contract with the Yes answer to the question, \u201cWill Donald Trump win the US Presidential Election in 2024?<\/a>\u201d now shows a 62% likelihood of the Republican defeating Harris, up significantly from 48% on October 9.<\/p>\n\n\n\n

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Source: ForecastEx<\/em><\/p>\n\n\n\n

PA, NC and GA are Pivotal<\/strong><\/h2>\n\n\n\n

The two candidates are focusing on swing state votes, which will be the deciding factor in the race to secure the 270. According to Real Clear Politics, among non-toss-up states, Harris is likely to win 215 electoral points so she needs to capture 55 among swing states, slightly more than half of the 104 votes up for grabs. Trump has 219 likely secured, requiring him to win only 51 more. The toss-up states and congressional district along with each battleground\u2019s electoral total as identified by Real Clear Politics are as follows:<\/p>\n\n\n\n