The stock market is set to react tomorrow as news breaks that President Joe Biden will not seek reelection, which is likely to lead to increased volatility.
This sudden decision raises concerns over economic stability as Democrats race to consolidate support behind a new candidate, with Biden endorsing Vice President Kamala Harris to take his place.
Josh Thompson, CEO of Impact Health USA, commented that the market could experience significant volatility as investors generally favor stability. “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.
In times of political and economic uncertainty, investors might gravitate towards safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less influenced by market fluctuations.
Additionally, there could be a slowdown in the trend dubbed the “Trump Trade,” which gained momentum following former President Donald Trump’s recent performances and events. This term refers to how investors respond to the potential of a second Trump administration.
Trump’s presidency had been particularly favorable to business interests, with expected boosts for sectors like healthcare, banking, cryptocurrency, oil stocks, and companies like Tesla, as well as Trump’s own media group.
Ed Mills, a Washington policy analyst at Raymond James, indicated that while Biden’s exit could halt the current momentum of the “Trump Trade,” it would not drastically alter their electoral outlook, which remains at 60% for Trump versus 40% for Biden or another Democrat. Mills noted that any broad market reaction would be limited as investors reassess the political landscape.