On Sunday, Marine Le Pen and Emmanuel Macron will square off in the second round of the French Presidential elections. Nearly every major poll and publication expects Macron to win the election with ease, as The Telegraph explains below:
The two candidates will face off in the second round on May 7, where Macron is widely tipped to become the president of France.
Oddsmakers have followed suit, but they seem to have thrown caution to the wind and all but ignored recent history. Despite the Brexit and Trump wins, wagering odds are shockingly low for Le Pen to win. It seems that bookmakers either have 1) not learned their lessons from the past, or 2) are goading the public into one of the biggest sucker bets of all-time on Le Pen. Even if no.2 is the truth, the risk/reward makes a bet on Le Pen almost too good to pass up.
As of 12:43PM EST on 5/1/2017, the French Presidential election odds were as follows on the Betfair exchange:
As Free Market Shooter has done in the past, the odds are displayed below, in percentage terms:
- Emmanuel Macron: 89.6%
- Marine Le Pen: 10.1%
After looking at the odds on the French Presidential election, I asked myself the question: why have oddsmakers priced Le Pen so cheaply? With the disclaimer that I know very little about France and the politics of the country, below are my observations:
It appears that pollsters believe that the majority of votes for the other candidates in the first round will accrue to Macron in the second round. As per The Telegraph, below are the results of the first round of the election:
And here are the poll numbers for the second round:
And this has led The Telegraph to come to the following conclusion:
According to recent polling by Elabe, he would take 65 per cent of the vote in a second-round run-off against Le Pen.
It is expected that Macron – a centrist – should be able to attract a wider spectrum of second-round voters than Le Pen, pulling in left-leaning voters from Hamon and Mélenchon as well as those leaning to the right that voted Fillon in the first round.
It appears oddsmakers are ignoring recent geopolitical history in addition to their own prior handicapping mistakes. Again, The Telegraph makes the following astute observation:
A word of caution: just because a candidate won the first round, it doesn’t mean that they’re going to win the presidency.
But they subsequently follow up with a false claim:
For those who have lost faith in political polling, asking people who are prepared to put their money where their mouth is the best way to predict elections.
After Brexit, the election of Donald Trump and the 2015 General Election, many now believe that political betting markets can better predict elections, relying on the wisdom of a crowd of punters to sort and weigh all the probabilities.
Though the Brexit odds flip-flopped prior to the event, oddsmakers generally price the “remain” odds far higher than the “leave” odds. As covered by Free Market Shooter, President Trump was heavily underpriced relative to Hillary Clinton, leaving many (including myself) to believe his chances were far slimmer than they actually were, as his big win demonstrated.
And still, both Brexit and Trump had higher win probabilities at all times prior to voting than Le Pen’s are current odds. Amazingly, even liberal rags have drawn the parallels between Le Pen and Brexit/Trump, saying Le Pen could be in line for a Trump-like upset of Macron.
Even if it is a sucker’s bet, the risk/reward on Le Pen is almost too good to pass up. If you were (somehow) able to bet Le Pen at the Betfair listed percentage of 10.1%, you would be getting almost 9 to 1 on your money wagering on a continuation of an existing populist trend in elections.
Don’t forget the liberal magazines who put the odds of Hillary’s win at 98% (or higher). A very similar trend is being exhibited here, with the MSM counting their chickens before they’ve hatched. Though they are completely independent events, oddsmakers have once again fallen for the pollsters, and are pricing odds in a similar fashion.
With such an outsized payoff to the upside, it appears that Macron’s early victory parade has opened up a potential low-risk dart throw wager opportunity on Marine Le Pen, especially for those who think populist trends are going to continue globally.
Additionally, perhaps lending credence to the fact that this is not a done deal yet, Macron’s lead in the French presidential race has dropped 5 points in the latest polls.
As Citi notes, the second round French elections being held this Sunday hasn’t really been on the radar, given that a low amount of risk is perceived for the event. Citi’s FX Options Trading desk noted that there are low betting odds for Le Pen (~10% betfair) and low atm vol over the event. However the weekly Elabe poll might catch some interest, although EUR looks unfazed to us. Macron’s lead has decreased to 59% form 64%, although still largely in line. Meanwhile Le Pen has gained five points to 41%, from her polling 36% on April 24. Before the run off this Sunday, Macron and Le Pen will face off in a TV debate on Wednesday evening.
As Mish recently noted, to win, Le Pen needs to capitalize on Macron’s gaffe. She also needs low turnout and a ni-ni impact that affects Macron more than it does her. This is an uphill battle, but possible, and more likely than most expect.