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With Election Day almost here, investors are paying close attention, and that's unusual. Financial markets don't typically move too much based on presidential campaigns, but this time, as Donald Trump's prospects have improved, stocks have been falling. The S&P 500 is down nearly 3 percent in a little more than a week, and some researchers say there is a lot more at stake depending on who wins the White House. NPR's Chris Arnold reports.
CHRIS ARNOLD, BYLINE: Eric Zitzewitz is an economist at Dartmouth who has a pretty cool job right now. He's basically decoding movements in the stock market to calculate the economic impact of a Trump versus a Clinton presidency.
ERIC ZITZEWITZ: This election is going to be a very big deal economically. The market really cares.
ARNOLD: Zitzewitz says that the market usually favors the Republican candidate, but in this at times bizarre election, that's been flipped on its head. The market wants Hillary Clinton to win. He says quite simply, stocks will be worth less if Donald Trump wins and more if Clinton wins - and quite a bit more.
ZITZEWITZ: We have a 12 percent difference in the value of the S&P under the two candidates.
ARNOLD: That is, the market anticipates that stocks would be 12 percent higher under Clinton than under Trump at least early on.
ZITZEWITZ: When we did this work on past elections, we were getting results more like 2 percent. This election is very different in that regard. The economic stakes are quite high.
ARNOLD: OK, so why does Zitzewitz say this? The first part actually has a lot to do with gambling. There are Internet sites you can go onto to bet on the outcome of the election. Zitzewitz calls them political prediction markets.
ZITZEWITZ: You have a lot of smart people trading in those markets who are looking all - at all of these different signals like polls and like aggregations of the polls and things like how the economy is doing.
ARNOLD: And so these betting sites give you the odds. They say 75 percent - Clinton wins. And now here's the key thing. Something happens, an event like the first debate where Clinton was seen to be the clear winner. It takes days or a week for the polls to reflect that. But on those gambling sites, the odds start changing right away.
ZITZEWITZ: Because everybody's trying to get in there before the other traders and profit from being the first to incorporate that information. So we're looking for very quick movements.
ARNOLD: So Zitzewitz says during that first debate, it quickly got 6 percent more likely for Clinton to win. So then he just matches that up with movements in financial markets for that same limited time window, and he could do the math and see how the stock market's pricing that in. Zitzewitz's published all this in a paper after the first debate.
ZITZEWITZ: We circulated the paper, and then we had this FBI letter event on Friday. And it really was striking how closely our results predicted how the markets reacted on Friday.
ARNOLD: So in other words, that seemed to strongly confirm.
ZITZEWITZ: The stock market doesn't want Trump to win.
ARNOLD: We should note that Zitzewitz wrote the paper with another economist whose partner worked in the Obama White House. Zitzewitz himself is a registered Independent. Now, some people might be thinking, hey, this guy's probably just like a closet Hillary supporter, and he's cooking his numbers to make Trump look bad. Here's what he says.
ZITZEWITZ: This cycle, it came out making Clinton supporters really happy. But when we did this for all of the elections eight years ago, it came out suggesting that the stock market did better under Republicans. So you know, we're - you're always going to make at least some people mad with some of these results. We just try to do everything honestly.
ARNOLD: Several mainstream analysts and money managers we spoke with explained it this way. Donald Trump is just much more of a wild card with greater uncertainty as far as what his policies would be. And so Wall Street this time around is rooting for the Democrat. Chris Arnold, NPR News.
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