Tomorrow’s stock market is set to react to the news that President Joe Biden has decided against seeking reelection, which is expected to trigger significant volatility.
The announcement will place economic uncertainty at the forefront as Democrats quickly mobilize support for a new candidate, with Biden having endorsed Vice President Kamala Harris as his preferred successor.
“If President Biden were to withdraw from the race, the market would likely respond with volatility and uncertainty,” stated Josh Thompson, CEO of Impact Health USA, in an interview over the weekend. “Investors typically favor stability and predictability, and such a major political change would disrupt both.”
This uncertainty may lead investors to flock to safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less sensitive to political and economic instability.
Additionally, the decision could impact the so-called “Trump Trade,” which has been gaining traction since former President Donald Trump outperformed Biden in a recent debate and survived an assassination attempt.
The Trump Trade reflects market behaviors and investor strategies in response to the potential of a second Trump administration. During his presidency, Trump was notably supportive of business interests, and sectors expected to benefit from a second term include healthcare, banking, cryptocurrencies, oil stocks, Tesla, and Trump Media and Technology Group.
“While Biden’s withdrawal could cause a momentum shift in the ‘Trump Trade,’ we do not anticipate a significant wider market reaction at this time,” noted Ed Mills, a Washington policy analyst at Raymond James, in a recent communication with CNBC.