The stock market is set to experience fluctuations tomorrow following news that President Joe Biden will not seek reelection, bringing economic uncertainty to the forefront as Democrats work to rally support behind a new candidate. Biden has endorsed Vice President Kamala Harris as the likely nominee.
Josh Thompson, CEO of Impact Health USA, indicated that if Biden officially steps down from the race, the markets are likely to react with volatility and uncertainty. Investors typically favor stability, and a significant shift in political landscape could disrupt that equilibrium.
This uncertainty may drive investors toward safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less affected by political and economic instability.
Additionally, the recent momentum of the “Trump Trade,” which has seen investors react favorably to the prospect of a second term for former President Donald Trump, might plateau. This trend gained traction after Trump outperformed Biden in a debate and survived an assassination attempt.
The “Trump Trade” refers to the market’s performance based on the anticipation of Trump’s second presidency, which initially benefitted sectors such as healthcare, banking, cryptocurrency, and oil, along with notable entities like Tesla and Trump Media and Technology Group.
Analyst Ed Mills from Raymond James stated that while the electoral odds would remain unchanged at 60% favoring Trump versus 40% for Biden or another Democrat, the withdrawal of Biden could lead to a pause in the “Trump Trade” as the market reassesses the political landscape. However, he does not foresee a major overall market reaction.