Why Donald Trump's odds in November may be better than expected

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Financiers may want to keep more than just one eye on Donald Trump. The bellicose real estate mogul all but sewed up the Republican U.S. presidential nomination with a victory in Indiana on Tuesday night. Wall Street luminaries attending Michael Milken's annual gathering expressed some unease, but Carlyle Group's David Rubenstein also noted that the markets are pricing in a Hillary Clinton victory. The odds can swing quickly, as Trump doubters have learned.

Trump's success in the Hoosier State forced his main competition in the party, Texas Senator Ted Cruz, to drop out. That should pit the billionaire against Clinton, who has a secure path to the Democratic nomination despite a loss in Indiana to Vermont Senator Bernie Sanders.

Republican U.S. presidential candidate Donald Trump smiles as he speaks at the start of a campaign victory party after rival candidate Senator Ted Cruz dropped after the race for the Republican presidential nomination, at Trump Tower in Manhattan, New York
Lucas Jackson | Reuters

A global economic slowdown and market swings already have made investors jittery. Negative interest rates alongside a more sluggish China and the possibility of a UK exit from Europe are among the many worries. Hedge funds just experienced their largest withdrawals in seven years, while U.S. GDP grew at a glacial 0.5 percent rate in the first quarter.

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The ascent of the unpredictable Trump adds to the mix. Even the best market prognosticators are bewildered. Steven Cohen, whose hedge fund generated consistently high returns before it was implicated in an insider trading scandal, said at the Milken Global Conference that he wasn't sure how to read the election because it was "so unusual."

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It was hard to find Trump supporters roaming the hallways of the Beverly Hilton. The normally buttoned-up crowd at one panel cheered Senator Lindsey Graham, one of the Republican hopefuls steamrolled by Trump, when he said, "My party has lost its way when it comes to the Donald."

Clinton is an experienced candidate with the sort of clear track record that reassures investors. Trump, by contrast, has put forward vague proposals and advocates ideas all over the political spectrum. When Rubenstein asked the Milken crowd if Clinton would be better for the economy, most raised their hands.

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Bookies have the former secretary of state as a 1:3 favorite. That makes Trump look like a limited risk for the markets. Since he entered the race last June, however, he has done nothing but surprise. It would be dangerous to presume he is an option too far out of the money.

Commentary by Rob Cox of Reuters Breakingviews.

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