Welcome to the Prediction-Market Election

Exxon and Chevron report blockbuster earnings. Meanwhile, the cracks in the AI trade get deeper, pushing the Nasdaq to its worst month in more than a year. Plus, prediction markets like PolyMarket and Kalshi say they can accurately predict elections. So, did they? We'll find out on Tuesday. Shane Copeland, who is the CEO of PolyMarket, has called his company a truth machine. So, if there are issues with credibility around a market, then that will make people less likely to trust them. It's Friday, October 30th. I'm Alex Osele for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. Starting off today with markets. The rout in tech sent the Nasdaq down 2.9 percent, its worst day since June. Intel alone dropped more than 28 percent. That's about $140 billion in market value. The S&P fell 1.8 percent, while the Dow lost more than 1 percent. And for the month, the Nasdaq finished down 5.3 percent. That's its worst month since March 2025. What's driving all this? WSJ Markets reporter David Uberti says there's been an evolution in investors' fears around the ballooning costs of the AI buildout. These really large companies have been sources of strength. Across the market. And I'm talking about companies such as Alphabet and Amazon. Both of those firms reported worse than expected earnings. And increasingly, these companies need to rely on debt to finance a lot of their data center buildout. They used to be cash cows printing money on a quarterly basis. And now they can't actually compensate for all the money that they're spending through their own operations. And so that's leaving investors with a lot of huge questions as to whether any of this AI spending will ultimately pan out. And at the same time, some of this. Some of the below-the-surface reports that those companies made suggest that their traditional business lines, like Google Search, for example, are actually not doing very well in this new age of AI. David says the growing skepticism around tech might not be such a big hit for Anthropic, which is expected to go public next month. Investors for years have really rewarded companies through this sort of growth-at-all-costs mindset. And now they're increasingly worried about having those sort of cash reserves. In the event. In the event that those companies that don't have them will have to turn to debt markets. And in a world of higher interest rates, doing that is increasingly expensive. If you are in Anthropic's position, if you have more than $100 billion of cash or cash equivalents on hand, that puts you in a better position than you would have been otherwise. And as you've seen from the market sell-off in recent days, the companies that don't have that cash on hand are getting punished. Meanwhile, in commodities markets, flare-ups in geopolitics are pushing oil higher. Oil rose above $117 a barrel after another strike on a tanker in the Middle East. And Ukraine struck an oil refinery in Russia in defiance of the Trump administration since the U.S. has pushed for a pause in refinery attacks. Brent crude has risen 14% in October. Speaking of oil, America's two biggest oil companies, ExxonMobil and Chevron, posted blockbuster earnings in the third quarter. Exxon's earnings more than doubled to more than $15 billion. Meanwhile, Chevron's profit almost tripled. And came in at about $10 billion. Both companies benefited from the disruption in energy markets after drones took out major oil refineries in Russia and the Middle East. And they're taking steps to boost their output of diesel to benefit from high prices of the fuel. And heads up that we dropped a special bonus episode earlier today. In What's News in Earnings, we look at how UPS and FedEx aren't just surviving in the era of high diesel costs. They're actually thriving. That's in your What's News feed now. Meanwhile, in the Middle East, things may be heating up. The U.S. is considering resuming combat operations on Iran after the midterms. And U.S. officials and others said that yesterday, the top U.S. commander in the Middle East briefed President Trump at the White House on the military options. WSJ national security reporter Laura Seligman joins me now. Laura, let's talk about what is actually going on in Iran in the past week or so. Yesterday, oil prices were down because it seemed like. The U.S. and Iran were coming back to the negotiating table. But now, oil prices are up again. What is happening? You have the U.S. military sending additional troops, additional ships. There's a third aircraft carrier, a second marine amphibious ready group heading to the Middle East now. The military is on high alert for any kind of order on strikes. Now, that doesn't necessarily mean that the order will come. I think a lot's going to depend on what happens in the midterms, frankly. And this may be a political decision for President Trump. What does the outcome of the midterms mean for Trump's mandate to continue on in this conflict in this way? A lot of polls and critics are speculating that the midterm elections could be a rebuke of the Trump administration's policy when it comes to Iran. Obviously, the war in Iran has led to a spike in oil prices and prices at the pump. And if you believe the polls, Americans are very unhappy about the continuation of this war and how it's. Now it's eating into their wallets. So I think there is some concern that if the Democrats win, it could be a repudiation of some of Trump's policies. But on the other hand, after the midterm elections, he doesn't really have anything else to lose. He's not on the ballot again. Let's say he does do these strikes as he's threatened. What would the goal there be? He's talked about doing another, as he called it, mini epic fury. They've already hit Iran really hard in the U.S. and Israeli strikes that happened in February. They destroyed much of Iran. Iran's missiles and nuclear capability. And yet they keep rebuilding drones and missiles that are still able to hit our ships, other ships going through the strait. Now, there could be a change in tactics. The president and his advisors have talked about a campaign that would go after civilian energy infrastructure targets. That's something that they've not really hit before. That was WSJ National Security Reporter, Laura Seligman. Thanks, Laura. Thank you. Coming up, October surprise? More like August surprise. Flu season started two months early this year. We get into why and how to fight it after the break. On prediction markets like CalSheet and PolyMarket, the midterms are big business. According to data provider The Block, last month, the two sites saw more than $3 billion in trading volume. across all U.S. election markets. The sites market themselves as being accurate to what's going on in the real world. More accurate, at least, than traditional political polling. But recently, the prediction markets haven't always gotten it right. So the midterms will be a big test of just how right bettors can call it. Kevin Dugan covers the culture of business at The Wall Street Journal and joins me now. Kevin, let's start with polling. I feel like it's gotten worse in the past few years. Why is that? And why do prediction markets think they can do better? So polling has gotten harder. Remember, as a kid, you might have had calls to your parents at dinnertime, and they would have these long conversations where they would talk about whether they liked a candidate or not. You don't have that same kind of ability to reach people right now. You do have the Internet, but when you have polls embedded on a website, it doesn't give you exactly the same kind of gold standard data that randomized calls might produce. So that is. a big part of it. You also have to add incentives. A lot of people don't trust pollsters, so they might tell you what they think you want to hear. That makes sense. It seems like it's harder to reach potential voters. Now, Kalshi, for its part, says its platform reflects what's actually going on. This is from a video Kalshi just put out. Overall, predicted probabilities on Kalshi's election markets match closely to real-world outcomes. While markets can tell you what the wisdom of the crowds thinks is like, likely, only voters decide the actual outcome. But what is the track record of prediction markets so far? I mean, just how wise is this wisdom of crowds? There is research from the Federal Reserve, from Morgan Stanley, that shows that across a lot of different domains, prediction markets are pretty accurate. Demographic or political biases don't really bleed into people's predictions because they want to make money. But it's not as cut and dry as all that. So what we. What we've seen this year are pretty big whiffs in the Brazil election, in the Serbian election, in the Democratic nomination in Wisconsin. The reason why, we believe, is it looks like the poorer quality of data coming out around these elections, coupled with the relatively low volume of trades, that this is starting to create markets where the odds ended up being wrong. Right. That's the primary for the governor's race in Wisconsin this summer. I think I remember that one. It was the progressive versus the moderate. Walk us through what happened on the prediction markets. So Francesca Hong was the clear favorite in prediction markets to get the Democratic nomination in Wisconsin earlier this year. She was a polarizing candidate who was associated with the Democratic Socialists of America. So the markets loved her because there was a lot of momentum around that. Now, Democratic primaries. The Democratic primary polling is not very robust. So people had to make an educated guess based on these. bigger national trend. And that led to the overall impression that she was definitely going to win. So right before the election, Francesca Hong's odds on polymarket were over 96%. Now, the day of the election, she lost by about half a percent to David Crowley, who is a moderate Democrat, by about 4,000 votes. So they whiffed it, basically. They totally whiffed it. Now, the prediction markets will say, you know, something 80-20, it will still happen X percent of the time. This wasn't definitely going to happen. These reflected odds. And that may be true. However, the data going into it seems to reflect that something is very likely to happen. Okay, so that sort of sets the stage, those primaries, of course, for the midterms. They're going to be a big test for these prediction markets. What kind of money is riding on some of these outcomes? There's a lot of money. Some data that we have seen, it shows that around $3 billion in trading volume is across all U.S. election markets. So that's pretty big. Right now, the prediction market odds are pretty much in line with expectations, although I think that they are more optimistic for the Democrats than what I am hearing out of D.C. The odds of Democrats taking the House, for instance, are around 90-something percent. The Senate is a little bit lower. I think I saw somewhere around 70 percent. So why does it actually matter whether these prediction markets are accurate? I mean, is it important to their business? I think it's crucial to their business. First of all, you've got to remember that back in 2024, the fact that traders on PolyMarket and CalSheet predicted Donald Trump was going to win in the face of polls saying the opposite gave them a lot of credibility. So if there are issues with credibility around a market, then that will make people less likely to trust them. What prediction markets want are good data to lead to accurate outcomes. This year, where there's going to be so many elections, and not all of the data is going to be gold standard, and that will have an effect on how people put their money down on certain candidates, that's going to be a real test for how much people are going to trust them going forward and how traders are going to react and digest that from here on out. Journal reporter Kevin Dugan, thanks so much for joining us. Thank you. And we should note that PolyMarket has a data partnership with Dow Jones, the publisher of The Wall Street Journal. And speaking of the midterms, Pope Leo just became the first pope to vote in a U.S. election. The Vatican said today that he submitted a mail-in ballot in Chicago. If it's feeling like everyone around you is getting sick all of a sudden, it's not just you. It's not just you. It's not just you. The new season has started unusually early this year, with CDC data showing positive flu tests for this time of year at highs not seen in a decade. WSJ health reporter Jennifer Kalfas is here now to discuss why, and what you can do to protect yourself. Jennifer, the flu started popping up in late August this year, about two months earlier than usual. What's going on? We're starting to see the spread of H1N1 in particular. That's a type of influenza. And scientists are seeing a particular mutation, what they call G151, that for some reason is allowing the flu to spread a little bit more easily, particularly on the West Coast so far. And a lot of doctors and public health experts are urging folks to get vaccinated if they haven't done so already. But the effectiveness of the flu shot really changes by season. In this case, the flu vaccine right now doesn't include the H1N1 that we're seeing with that G155V mutation. That being said, though, this flu vaccine will certainly provide more protection than it would to not get the flu shot. OK, good news. Everyone get your flu shot. But what does this mean for the rest of flu season? Does that mean it'll just be longer? It's possible that since we're seeing an earlier start to the season, maybe we'll see kind of two peaks of the flu season itself. We might see other types of influenza spreading a bit more later in the season, which is also kind of all the more reason to get your flu vaccine in case it does better protect against any other strains that might spring up later. But it's still, the jury's still out, I guess, on whether or not this will, will be a more severe or longer season than what we're used to. Jennifer Kalfas, thanks so much for joining us. Thank you so much. And that's What's News for this week. Tomorrow, you can look out for our weekly markets wrap up, What's News in Markets. Then on Sunday, we'll be discussing what the Trump administration's efforts to expand its role in elections means for voters. That's in What's News Sunday. And we'll be back with our regular show on Monday morning. Today's show was produced by Danny Lewis with supervising producer Tali Arbel. Michael LaValle wrote, Ayesha Al-Muslim is our development producer. Chris Zinsley is our deputy editor. Leetal Malad is our senior director of shows. And Samantha Hennig is the Wall Street Journal's head of multimedia. I'm Alex Osola. Have a great weekend and thanks for listening.