The stock market is set to react tomorrow to the significant news that President Joe Biden has chosen not to seek reelection, which is likely to create volatility.
This development raises concerns about economic instability as Democrats quickly attempt to rally support behind a new candidate, with Biden endorsing Vice President Kamala Harris as the preferred nominee.
Josh Thompson, CEO of Impact Health USA, indicated that if Biden formally withdraws from the race, the market could experience immediate volatility and uncertainty. Investors generally favor stability, and such a major political change could disrupt that preference.
In light of this uncertainty, investors may turn to safe-haven assets, such as gold, silver, and the Swiss franc, which tend to be less affected by political and economic upheaval.
Additionally, the market may see a slowdown in the so-called “Trump Trade,” a term that has emerged as former President Donald Trump has gained traction since outperforming Biden in debates and surviving an assassination attempt. The Trump Trade highlights how market behaviors shift based on the prospects of a second Trump administration. Under Trump’s presidency, business interests flourished, and stocks in healthcare, banking, cryptocurrency, oil, Tesla, and Trump Media and Technology Group were particularly buoyed by expectations of a second term.
Ed Mills, a policy analyst at Raymond James, stated that if Biden steps back, their electoral odds would remain at approximately 60% for Trump versus 40% for Biden or a Democrat challenger. Mills noted there might be a temporary halt in the Trump Trade as the market recalibrates, but he does not anticipate a significant overall market reaction.