Investors Predict Democratic House

Investors may read the Wall Street Journal for business news, but they don’t let the preferences of the editorial page determine their predictions as to who will control Congress:

What started as a bounce for Democrats when Republican Rep. Mark Foley’s troubles surfaced late last month has turned into a sustained rally in electronic trading markets.

Trading activity in both the Iowa Electronics Market , an online marketplace operated for research purposes where wagering is limited to $500 per person, and on the Irish-betting site Intrade suggest the odds of Democrats retaking control of the House in November’s midterm elections have steadily improved over the last two weeks. IEM trading at the end of last week put a 67% probability on that scenario, up from 50% earlier this month. Similarly, the political junkies betting on Intrade last weekend foresaw a 69% probability of a Democratic takeover of the House, up from 41% a couple weeks ago.

Their view mirrors but is a bit behind the conventional wisdom. While many political analysts now see the chances for Democrats to control the Senate at around 50:50, the investors still believe the Republicans will retain control, with the confidence of some investors falling.

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