The stock market is set to experience volatility following the announcement that President Joe Biden will not seek reelection. This development is expected to raise economic uncertainty as Democrats quickly rally around a potential new candidate, with Biden endorsing Vice President Kamala Harris for the nomination.
Josh Thompson, CEO of Impact Health USA, noted that a withdrawal from the race by President Biden would likely result in immediate market fluctuations. Investors tend to favor stability, and a major political shift could disrupt that predictability.
In response to this uncertainty, investors may gravitate towards safe-haven assets such as gold, silver, and the Swiss franc, which are typically less affected by political and economic turmoil.
Additionally, the announcement might hamper the recent momentum of the “Trump Trade,” which has gained popularity as former President Donald Trump has shown strong debate performances and survived an assassination attempt. The term refers to the market’s reactions and trading behaviors in anticipation of a potential second Trump administration. A range of sectors, including healthcare, banking, cryptocurrency, oil, and companies like Tesla and Trump Media and Technology Group, are seen as likely beneficiaries if Trump were to return to office.
Despite these potential shifts, Raymond James Washington policy analyst Ed Mills stated that his firm would not immediately alter its electoral odds, which currently stand at 60% in favor of Trump compared to 40% for Biden or any Democrat. He mentioned that while there may be some reassessment of the markets in light of Biden’s exit, a broader market reaction is not anticipated.