If you’re getting a sense of déjà vu in parallels between the US election and June’s UK Brexit referendum, you’re not alone.
Markets are rallying in anticipation of a Hillary Clinton victory, deemed by many to be a continuation of the status quo, while the polls and betting markets both have the Democratic nominee in the lead, albeit by a slim margin.
It all feels a little eerie.
That scenario is familiar – just before the UK voters stunned the markets by choosing to leave the European Union, an outcome that few, outside staunch “leave” campaigners, believed was possible in the hours leading up to the referendum.
For Damien McColough, David Goodman, Richard Franulovich, Sean Callow and Tim Riddell, strategists at Westpac, the sense of déjà vu is strong, stating in a research note on Tuesday that “the parallels between the UK referendum and the US election run deep”.
Here’s a snippet from the note, which outlines just how similar the parallels between the candidates and polls:
Clinton’s campaign and the UK “remain camp” both represent continuity and an “establishment” approach to trade and immigration. The “leave camp” and Trump have been portrayed as insurgent outsiders tapping into economic insecurity and deep antipathy to governing “elites” who favour restrictions on trade and immigration. Demographic trends supporting each side (i.e. urban vs non-urban voters, college degree vs non-college degree) follow similar trend lines too.
The parallels extend to polling and prediction markets as well. The FT’s poll of polls in the days into the UK vote gave a 2pt spread to the remain camp (48%-46%), while Real Clear Politics’ poll of polls favours Clinton with a 2.9pt spread (47.2%-44.3%). Prediction markets are similar too – the remain camp was given a 20% probability in the days just ahead of the UK vote while Trump is about a 1 in 5 chance according to Betdata.
If you replaced Clinton and Trump with “remain” or “leave”, along with the market moves seen over the past 24 hours, it’s easy to see why so many can see a similarity.
The only question now is whether the similarities extend to the outcome of the election, something few appear prepared for in light of recent surge in investor sentiment.
The election result is likely to be known around 3pm on Australia’s east coast on Wednesday, November 9.
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