The stock market is set to open tomorrow amid significant news that President Joe Biden has decided not to seek reelection, which is likely to introduce volatility into the markets.
In a notable economic development, Mars, the company known for M&M candies, is acquiring Kellanova, the producer of Pop-Tarts, in what is expected to be one of the year’s largest mergers.
The announcement prompts a wave of economic uncertainty as Democrats work to rally behind a new candidate, with Biden reportedly endorsing Vice President Kamala Harris as a potential nominee.
Josh Thompson, CEO of Impact Health USA, expressed that an announcement of Biden stepping back from the race would likely provoke immediate volatility and uncertainty within the markets. “Investors generally prefer stability and predictability, and such a significant political shift would disrupt both,” he remarked.
This uncertainty may lead investors to favor so-called safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less sensitive to political and economic upheaval.
Furthermore, the shift could hinder what is referred to as the “Trump Trade,” a market trend that has gained momentum following former President Donald Trump’s strong performance in debates and recent events. The Trump Trade reflects how investor behavior changes in anticipation of a potential second Trump administration, favoring sectors such as healthcare, banking, cryptocurrency, and oil, as well as companies like Tesla and the Trump Media and Technology Group.
Ed Mills, a policy analyst at Raymond James, noted that if Biden were to exit the race, there might not be an immediate change to the electoral odds currently set at 60% for Trump and 40% for Biden or a Democrat. However, he acknowledged the possibility of a slowdown in the “Trump trade” as the market realigns itself with the evolving political landscape, though he does not foresee a broader market reaction.