presidential race. There are actually two markets for the general election at Intrade: One for which party will win the presidency, and one for which individual will win the presidency. It's better to look at the party market than the individual market; the individual market will always have a few percent floating around for remote possibilities like Barack Obama or Mitt Romney not winning their party's nomination.
Intrade currently posts a 55.9% chance for the Democrats to win, and 43.2% for the Republicans. Intrade has always been skeptical of the Republicans' chance of beating Obama in 2012. Intrade only briefly gave the Republicans as much as 50% to win, in early October last year. That moment of optimism was likely triggered by the downfall of Rick Perry in the polls at about that time. Intrade felt confident Romney would win the nomination, and obviously felt he would be a stronger general election candidate. But the long primary season seems to have worn away their confidence, such as it was.
In spite of this, Intrade's view of Romney's chances has gone up slightly in the last few weeks. For months, they had the Republican Party in the upper-'30s. Apparently a few weeks of watching close poll numbers between Romney and Obama has caused them to give Romney more credit.
Also of note is the Intrade market for Republican vice presidential nominee. U.S. Senator Rob Portman from Ohio currently leads with a 27.5% chance of being selected. U.S. Senator Marco Rubio from Florida is second with 22.1%. Everyone else is far below; there's a huge pack of potential candidates in single-digits. New Jersey Governor Chris Christie is at 6.8%, and somehow Tim Pawlenty is in fourth at 6.2%. Rubio was once the clear favorite on Intrade, running in the '30s. But since April or so, his numbers have gone down in favor of Portman.
How should these numbers be interpreted? Intrade is a pretty good indicator of conventional wisdom. Intrade investors tend to lean left and reflect the opinions of Washington, D.C. Democrats. Very often the investors are not Americans (American law related to Intrade makes processing payments more cumbersome). They would tend to be influenced by their home countries' media, which is usually even farther-left than American media.
Therefore, unlike the Republican primary Intrade markets, in which the investors had less emotional stake, we can expect that Obama's odds will be inflated relative to what they probably ought to be. Democrats tend to overestimate their chance of victory in presidential elections: In every recent presidential election aside from 1984, Democrats have been confident of victory. (Republicans, if anything, tend to be more pessimistic than circumstances warrant.)
What about the VP nominee market? Portman's rise (at the expense of Rubio) has come from increasing buzz out of Washington political commentators. Unless the Romney camp is deliberately leaking information about their selection process--which is unlikely at this stage--the buzz around Portman may not actually reflect Romney's decision-making. In fact, it may be an attempt to influence it.
Left-leaning Intrade investors may be acting out of optimism even in the VP market. As we explained in the Candidate Rankings, Obama's most likely scenario for victory is one in which he successfully paints Romney as a retread of George W. Bush in terms of economic policy. The selection of Portman as VP would be very advantageous to Obama for this reason. By contrast, choosing Rubio would reinforce the idea that Romney intends to take the country in a new direction--while harming Obama in Florida and among Hispanics.