In numbers, why Biden still remains great value to be re-elected

Last week, Donald Trump overtook Joe Biden to become the favourite to win the 2024 presidential election. In my view, this was just the latest example in the fog of irrational thinking which has polluted the US election markets over the last five or so years.

In this article, I’m going to put my money where my mouth is and attempt to put some hard numbers on Biden’s re-election chances and outline why I believe the incumbent president is still an underrated prospect.

The Primaries

There are four possible avenues which could prevent Biden from winning the Democratic nomination: an existing candidate defeats him, a new major candidate joins the race and beats him, he turns around and announces that he’s not running after all, or he dies / becomes seriously ill.

When it comes to the existing candidates in the Democratic primary, there is no realistic challenger. As I outlined back in July, Robert F. Kennedy Jr. had no chance of being the nominee, and he is already preparing to withdraw from the primary and run as an independent (likely in conjunction with Team Trump in an attempt to tear away votes from Biden; in reality the opposite may happen). Marianne Williamson, who is at least running a seemingly-earnest campaign from Biden’s left, continues to poll in single figures.

Excluding death or ill health, which we’ll come to later, the chance of Biden legitimately losing the primary to an existing candidate is effectively zero.

Another primary possibility relates to whether another major candidate enters the race and challenges Biden, with California governor Gavin Newsom seemingly the most likely contender. Bearing in mind that an incumbent president has never lost a primary challenge in the modern era of this system (since 1972), it’s doubtful that someone like Newsom, who no doubt has his eyes on 2028, would risk damaging his long-term prospects in the Democratic Party for a likely-futile primary challenge. So let’s say there’s a 10% chance of another major candidate challenging Biden (even this is probably an overstatement), and a 20% chance of them actually winning. In total, that gives us a 2% chance of Biden being defeated by a new candidate.

Now for the more serious prospects. What’s the likelihood of Biden turning around before the convention and announcing that he will not seek re-election after all (excluding a case of ill health)? Around 10% seems like a fair assessment, and the more time that passes the less likely it becomes. Biden would be doing a profound disservice to the Democratic Party and its voters to delay this announcement so long that none of his potential successors have time to prepare a presidential campaign.

The alternative scenario here is that Biden has informed Kamala Harris of this imminent u-turn and the party elites are already preparing for a Harris coronation. With a different VP, this hypothesis might be more reasonable, but it’s made much weaker by the fact that Harris is not an electorally-strong politician. The current vice president’s weakness as a vote-winner is not a new phenomenon if you take a glance at her electoral history. In the California Attorney General elections, she performed worse in 2010 (46.1%) than the two Democratic candidates who preceded her (51.3% and 56.3%) and in 2014 (57.5%) performed worse than the two who followed (63.6% and 59.1%). Likewise, in the Democratic presidential primaries in 2020, despite competitive fundraising numbers and being the market favourite to win the nomination during the summer of 2019, Harris ended up dropping out of the race before a single ballot was even cast.

In head-to-head polls against Trump, Harris polls with a margin around three points worse than Biden. In a highly-polarised political environment, that would be more than enough to lose the election for the Democrats.

Assuming he remains in good health, I cannot envision a scenario in which Biden — who got into the race in 2020 with the express purpose of defeating Trump in what he saw as a battle ‘for the soul of the nation’ — steps aside at the last minute and risks an unpopular vice-president losing to his predecessor, ushering in another four-year term which could stress test American institutions to their core.

The more time that passes, the larger Harris’ institutional head start would be over other candidates in a short primary, and thus the higher her chance of winning the nomination becomes in a hypothetical ‘Biden no bet’ market. Given her electoral weaknesses, this just reinforces the likelihood of Biden staying on to fight the general.

So in total, we’ve got around a 12% chance of Biden not winning the primary, assuming he is alive and well (10% that he decides not to run; 2% that he’s defeated by a new candidate). At this point we also need to consider the biggest doubt about Biden: his age and health.

It feels pretty grim to have to look through mortality stats to assess the probability of someone’s death, but with increasingly gerontocratic US politics, smart traders are going to have to do this kind of thing more and more moving forward.

On Biden’s side is his family history of longevity — his mother lived to 92 and his father to 86. Furthermore, the president does not have any (known) major health issues and receives some of the best medical treatment on the planet. For argument’s sake, though, let’s assume that Biden is just an average non-Hispanic white male American (what I’m going to call an ‘Average Joe’ from here on).

Based on mortality tables, the chance of death for someone of Biden’s gender and ethnicity begins to increase quickly past the age of 80. While there’s around a 35% chance of an Average Joe dying between today and the end of Biden’s hypothetical second term on 20 January 2029, the chance of him dying between now and the Democratic convention remains small at 5.3% (it’s 6.6% for the general election). Although that figure is likely an overstatement for the aforementioned reasons of Biden’s health, healthcare quality and family history, let’s leave the estimate as it is and assume it also accounts for the possibility of the president becoming seriously ill and having to withdraw from the race.

Having covered every scenario, I estimate the total chance of Biden winning the nomination is (1 - healthy loss) * survival chance = (1 - 0.12) * (1 - 0.053) = 0.88 * 0.947 ≈ 83.3%, almost exactly 1.20 in decimal odds. His actual price of 1.46 (68%) remains a mystery to me. It’s frankly astonishing that he remains the same price to win the nomination as he was in early March, despite seven months passing since then with no health scares or major slip ups, no serious prospect of another Democratic candidate entering the race and Biden actually confirming his candidacy.

The General Election

Since the Second World War, the base rate of victory for an incumbent president seeking re-election is 66.7% (six out of nine). Given this small sample size, neither approval ratings nor national midterm results can reliably predict future outcomes, but if we instead look on a party basis, the length of time a party has been in office and the previous Electoral College result can give us a decent baseline estimate of around a 60% chance that the Democratic nominee wins in 2024 against an average Republican candidate.

When it comes to Republican candidates, Biden could not hope for a better scenario than facing Trump again. Despite current polling showing the two basically neck-and-neck, polls at this stage in the cycle are not predictive, and the actual electoral evidence from last year’s midterms suggests that Trumpism is a significant drag on the Republican ticket.

The former president’s trials will be splashed all over television and the internet next year for the entirety of the election season, bringing back into sharp focus the events of January 6 and his attempts to overturn the 2020 election. Trump’s Georgia trial starts later this month and will run to at least February, and the federal case in which he is charged with trying to reverse the 2020 election results begins in March. These two trials come alongside at least five others beginning before election day.

Under these circumstances, one cannot logically make Trump the favourite in a 2020 rematch. I would make Biden’s chances of beating Trump something like 65%, and 50% against a different Republican. Multiplying these scores by the current market estimate of a 79% chance of Trump winning the Republican nomination gives Biden a 62% chance of winning the presidency if he is the nominee.

Accounting for the earlier estimate of 83% to win the nomination and the 1.3% chance that Biden dies between the Democratic convention and election day, we get 0.618 * 0.833 * (1 - 0.013) = 50.8%. I would therefore make Biden a narrow odds-on shot to win the presidency next year, much shorter than the current best price of 2.84.

The Markets

The illogical conspiracy-theory incursions which I wrote about in July — that RFK Jr. was going to win the Democratic nomination (which traded in single-figures at one point); that Trump was still going to win the presidency after losing in 2020; that the Democrats were going to install Hillary Clinton as the nominee after Biden had won the primaries; that Biden secretly had dementia and would be replaced by Kamala Harris imminently (for the last three years) — are still active in the markets. The latest anyone-but-Biden push has been Michelle Obama, who is now trading in the teens to win the presidency, despite the former FLOTUS never expressing any interest in getting into electoral politics.

These flights of fancy have not shown any sign of crashing down to reality over the last few years and calculating rational, step-by-step estimates of probabilities can help highlight the absurdity of the corresponding market prices. In doing so, Biden winning the presidency illuminates itself as the best value bet on the coming election.