By Noah Lieberman
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For the first time in three debates, former Secretary of State Hillary Clinton entered as a favorite on the markets, with the ability to potentially play it safe and remain on top for the entire night. Unlike the Republican debate, the lack of candidates in the debate gave Clinton a chance to control the narrative and control the pace of the debate. She stayed ahead of Sanders for almost the entire debate, as Bernie trailed by 5-10 percent until about 9:45. Sanders abandoned his campaign manager’s line of attack on the DNC and Clinton over the punishments for his campaign’s data breach, and struggled to generate momentum again in the first part of the debate, which focused on foreign policy. Clinton seemed poised and knowledgeable, and was even willing to deviate from President Obama on issues such as the crisis in Syria. For the first hour and a half of the debate, everything the experts speculated coming into the debate was coming true, and the market reflected that lack of new information, with very little change in the market.
However, as the focus of the debate shifted to social and domestic issues, something which did not happen in the Republican debate earlier this week, Sanders began to hit his stride and fight back. Though the questions on gun control didn’t quite work in his favor, since Hillary has a position more in line with the party on that issue, but as the questions turned to health care, education, and tax reform, Bernie began to catch up to and eventually pass Clinton. The market was satisfied that social issues came up, received the results it expected, and kept Bernie at an eight point lead until foreign-affairs questions came up again thirty minutes later, when Hillary got an uninterrupted four minutes to discuss the situation in Libya. She gave a middling answer and received a middling response, neither rising nor falling a great amount in the market, but it confirmed a truth about the Democratic debate: Traders know how the candidates will respond on issues; it is just a matter of which opportunities each one will be given. Sanders couldn’t move past 52 percent on the market because that’s all the traders were willing to give him based on his past performance; all that mattered was that he had a chance to say his piece on social issues and didn’t screw it up. Similarly, prices moved very little when Hillary had her chance to talk on end about Libya because foreign issues had already been discussed and the market had already been swayed by the candidates’ answers on similar questions early on.
That is why prices stayed almost entirely stagnant for the last forty-five minutes of the debate, heading into the focus group vote with Senator Sanders holding a slight, eight point edge over Secretary Clinton. In the end, the focus group reflected that sentiment, giving Sanders the slightest of victories while praising his straight-shooter attitude and vigor on a range of issues. The reasons for his victory were very similar to the reasons given in the first debate he won, and reinforces the notion that not much has changed in the way voters and traders view the Democratic race. Sanders should probably be the favorite heading into the January debate, but if he doesn’t have a decisive victory soon, his chances of winning the Democratic nomination may soon drop to zero.