With the British General election approaching a lot of people who would never bet on the stock market start spread betting. If you know a bit about politics then this may be a chance to make some money as political odds can often be skewed by sentiment rather than any calculated odds. Here are some outcomes we think are value bets. Please note that these are not bets that we think are going to win, just some that are underpriced:
1. Bet against the Tories. The Conservative Party is expected to win and win big. After being constantly underestimated since the 1990s the Tories are now being over backed. The electoral system is still rigged against them; they have to win some really improbable seats with strong Labour Party machines; and the governing party almost always close a lot of the gap before an election.
2. Bet against May 6th, before or after. Everyone has May 6th in their diaries. After all this is when the local elections are. But don’t underestimate Labour’s desire to spring a surprise or to string out the vote until the last possible moment. May 6th is over backed and the other possibilities, both before and particularly after are under backed.
3. Bet on the stock market and pound falling. The stock market thinks that the economy needs the deficit to be cut and trusts the Conservatives to have the determination to cut the deficit. The same goes for the foreign exchange markets. They’ve priced in a convincing Conservative victory. Any other result should send both the stock market and the pound crashing through the floor. This does not just include a Labour win but also a hung parliament or even a very narrow Conservative majority.