The stock market is poised to open tomorrow amid the announcement that President Joe Biden will not seek reelection, leading to expected volatility in trading.
With this decision, economic uncertainty will become a prominent issue as Democratic leaders aim to unite behind a new candidate, with Biden endorsing Vice President Kamala Harris as a potential nominee.
Josh Thompson, CEO of Impact Health USA, suggested that the market’s immediate reaction to Biden’s withdrawal could be marked by volatility and uncertainty. “Investors generally prefer stability and predictability, and such a significant political shift would disrupt both,” he explained.
This uncertainty may drive investors towards safe-haven assets like gold, silver, and the Swiss franc, which tend to be more stable during times of political and economic unrest.
Additionally, there may be a pause in what is referred to as the “Trump Trade,” which gained momentum following former President Donald Trump’s strong debate performance against Biden and subsequent high-profile incidents.
The “Trump Trade” describes the market’s behavior and investor sentiment relating to the possibility of a second Trump administration, during which Trump was known for his business-friendly policies. Industries likely to benefit from a potential second term include healthcare, banking, cryptocurrency, oil stocks, Tesla, and Trump Media and Technology Group.
Ed Mills, a Washington policy analyst at Raymond James, indicated that even if Biden exits the race, they would not significantly alter their electoral predictions (currently estimating a 60% chance for Trump versus 40% for Biden or another Democrat). Mills mentioned that while the “Trump Trade” might experience a slowdown as the market reassesses the political landscape, a significant overall market reaction is not anticipated.