Tomorrow, the stock market is set to react to the news that President Joe Biden will not be seeking reelection, which is expected to introduce volatility.
Strategists note that the Bank of Japan’s decision not to raise interest rates will reignite the yen carry-trade. This situation may further complicate the economic landscape as Democrats scramble to back a new candidate, with Biden endorsing Vice President Kamala Harris for the nomination.
Josh Thompson, CEO of Impact Health USA, indicated that Biden’s withdrawal would likely lead to market instability. “If President Biden were to announce his withdrawal from the reelection race, the immediate market reaction would likely be one of volatility and uncertainty,” he stated. Investors typically favor stability, and this major political shift could disrupt that.
This uncertainty may cause investors to gravitate towards safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less affected by political and economic turmoil.
Additionally, there may be a slowdown in what is referred to as the “Trump Trade,” which has gained momentum following Donald Trump’s strong performance in debates and his survival of an assassination attempt.
The “Trump Trade” reflects how market behavior shifts as investors anticipate the possibility of a second Trump administration. Trump’s prior presidency was seen as beneficial for various sectors, including healthcare, banking, cryptocurrency, and oil stocks, in addition to companies like Tesla and the Trump Media and Technology Group.
Ed Mills, a policy analyst at Raymond James, noted in a report to CNBC that while Biden’s exit could stall the current “Trump trade” as the market reevaluates the electoral landscape, he does not foresee a widespread market reaction.