ROI-Surge in 2028 US presidential bets reframes markets after midterms: Mike Dolan

The sweeping Democratic victory in the US midterm elections has markets pricing two years of gridlocked government. But a sudden shift in 2028 presidential ​betting odds could reshape how investors read everything that follows. The largely expected, if surprisingly comprehensive, Democratic capture of both houses ​of Congress drew an equivocal market reaction. But one move on the sidelines stood ‌out.

Prediction ​markets suddenly show Georgia Senator Jon Ossoff, a Democrat, as the favourite to win the White House in two years. It's the first time that a presumed Republican candidate, current Vice President JD Vance, has not been the clear frontrunner to succeed Donald Trump as president in two years. Polymarket and Kalshi — prediction sites that allow individuals to trade with each other on the outcomes ‌of myriad political, sporting and financial events — both showed Ossoff on 18%, up 5 percentage points and 3 points ahead of Vance as trading unfolded on Wednesday.

Those odds two years out are necessarily tentative and volatile, as neither man is yet an official candidate for his respective party and Ossoff has repeatedly denied he wants to run. But the 39-year-old Ossoff, who retained his Senate seat in Georgia this week by a margin of almost 20 points, appears to meet many voters' criteria, not least as a centrist Southern Democrat. Punters have already placed large ‌bets on his presidency.

That early 2028 betting surge matters to financial markets because it underscores this week's tilt toward Democrats in Congress and the issues they support, even if macro-policy stasis prevails through 2028. If a Democrat were to win in 2028, investors ‌with reasonable horizons will start to bake that in gradually, beginning to discount this week's hot-button issues from AI regulation and data-center pushback to crypto scrutiny, defence spending, immigration, healthcare, foreign and trade policies.

With markets leaning toward a Democrat, the party's positions on these issues matter beyond a vetoed Congress. Polling and 2028 betting markets will become increasingly sensitive. "The probability of a Democratic victory in the 2028 presidential election has increased materially," said Pictet Asset Management strategist Luca Paolini, adding that the Democratic agenda on regulation and corporate taxation must be taken seriously as a risk for earnings and growth.

Crucially, the main drivers of the Republican defeat — higher fuel prices and living ⁠costs caused by ​the Iran war and tariff hikes — mean neither party will want to ⁠risk voter fury again. After all, the global inflation surge during Joe Biden's presidency was a key reason Trump returned to the White House with such ease in 2024 against Kamala Harris.

TACKING BACK TO THE CENTER Taken further, the big red electoral flag from "cost-of-living" failures will probably make both parties keener to de-escalate Middle East ⁠wars, take the heat out of prices and give the Federal Reserve the space to do its job.

That could easily become an Ossoff playbook, but Vance is already on to it too. Vance was quick on Wednesday to publicly identify the Iran war as "the reason we lost." That sent oil ​prices plunging on speculation of a shift in US policy. But betting odds between him and Ossoff also narrowed.

Could both potential candidates now tack toward other centrist issues that seemed to draw voters this week: AI regulation, less draconian migration ⁠policies and cooler trade and foreign policy? "Republicans will need to reassess the staying power of his 'America First' agenda as they look ahead to 2028," wrote UniCredit strategist Jonathan Schroer on Wednesday. "The poor showing by Republicans will weaken MAGA favourites, such as JD Vance and Marco Rubio, and might encourage an outsider with no MAGA association to tack ⁠back ​towards the political centre."

There has been constant speculation in recent weeks that a bruised, lame-duck Trump presidency could see him become ever more erratic in the policy areas he controls, particularly foreign and military policy and, to some degree, trade policy. That's not how he appeared in the first interviews after the results came in, a factor markets took as positive.

But even if Trump plays wild cards in foreign policy, the inexorable grind toward 2028 will lessen their impact with each passing day. "The market is increasingly likely ⁠to interpret surprising policy shifts from the Executive as time-bound by the next Presidential election or the new domestic political configuration," Deutsche Bank strategist George Saravelos said on Wednesday, adding the risk premium in oil would now see "negative time decay" the longer an ⁠Iran re-escalation takes.

Nobody wants to wish away two years and, as ⁠the past two illustrate very clearly, a lot of water can flow under the bridge over that period. But for long-term strategic calculations and investment decisions, two years is no time at all. The clock is ticking.

(The opinions expressed here are those of Mike Dolan, a columnist for Reuters.) Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary.

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(By Mike Dolan; Editing by Marguerita Choy)