NEXT week’s US election now looks like a statistical dead heat. However, the prospect of another Florida-style stalemate is strikingly inconsistent with the view on Wall Street and in the US business community, where a Bush victory seems to be viewed as almost certain.

Barron’s, weekly sister paper of The Wall Street Journal, reported on Friday that 84.7 per cent of US fund managers expect a Bush win.

The contrast between investors’ personal expectations and the evidence provided by opinion polls, suggests a dangerous level of complacency on Wall Street and means that the election will have a big impact on the world economy and financial markets, whichever way it turns out. Even a Bush victory, which in theory is already “in the market”, could have a big impact since many investors must by now be nervous about the contrast between their gut feelings and the polls.

In fact, investors’ sudden recognition that the election is much closer than expected could explain the recent weakness of the dollar and Wall Street — and unfortunately the uncertainty could persist well beyond next Tuesday.

To judge by the opinion polls, the chances of a Florida-style deadlock are quite high. As I reported last month after my US visit, each side has enlisted an army of lawyers and is said to have allocated at least $20 million (£10.8 million) for “post-election legal contingencies”. The Florida hanging-chad disputes left America and the world in limbo for 36 days four years ago. Something similar could happen again next month, perhaps in as many as five or six states.

Of course, things could change in the next ten days, but as things stand there is no way to reconcile objective polling evidence with the very high probability attached to a Bush victory on Wall Street.

Even the 58-42 split in favour of Bush in the University of Iowa electronic market (see top chart), in which academic experts and investors back their judgment with real money bets, seems unrealistic.

If anything, a dead heat in the opinion polls suggests two reasons why Kerry is likely to win. First, there are some well-established biases in the polls that tend to underestimate the role of young, poor and new voters and to overestimate support for incumbents.

The most significant of such factors in this election are believed to be the undercounting of newly registered voters (mostly Democrats) and the tendency of young people to use mobiles rather than fixed-line phones (again predominantly Democrats). In addition, there is a well-established “incumbent-bias” that results in challengers normally receiving 1 or 2 percentage points more in the actual election than their final polling figures. Incumbents, by contrast, generally receive exactly the proportion of the vote indicated by the final polls.

A second structural problem for the Bush campaign has been less widely recognised. For economic reasons the line-up of state voting looks less favourable for Bush than it was four years ago. US elections tend to be won or lost in the Midwest and Great Lakes states — Ohio, Michigan, Illinois and so on — because of the electoral college system. But the Midwest also happens to be America’s manufacturing heartland — and the manufacturing sector has fared much worse than the rest of the US economy in the past four years.

As the second chart shows, manufacturing job losses have been greater during the Bush presidency than in any other four-year period since the Second World War. The non-manufacturing economy, by contrast, has done quite well. The charge that Bush is the first president since Herbert Hoover to preside over a net loss of jobs rings true only in the “rustbelt”. But the rustbelt is where every vote counts.

Having established that the election is likely to be closer than most investors are expecting, let me try to speculate, as objectively as I can, about some economic consequences of the two possible outcomes.

Starting with stock markets, bonds and economic growth, the contrast seem fairly clear.

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