The stock market is set to experience volatility with the announcement that President Joe Biden will not seek reelection. This unexpected development will likely bring economic uncertainty to the forefront as the Democratic Party rallies behind a new candidate, with Biden endorsing Vice President Kamala Harris to be the nominee.
Josh Thompson, CEO of Impact Health USA, expressed to Yahoo Finance that such a significant political shift would disrupt market stability. He noted that if Biden were to withdraw, the immediate market reaction would likely involve turmoil and uncertainty, as investors tend to favor stable and predictable environments.
In light of this uncertainty, investors may turn to safe-haven assets like gold, silver, and the Swiss franc, which are typically less affected by political and economic fluctuations.
Additionally, the political landscape could impact the so-called “Trump Trade,” which has gained momentum following former President Donald Trump’s performance in debates and his survival of an assassination attempt. The Trump Trade refers to market behaviors influenced by the anticipation of a second Trump administration, which was known for being business-friendly. Key sectors expected to benefit from another Trump presidency include healthcare, banking, cryptocurrency, oil, and companies like Tesla and Trump Media and Technology Group.
Ed Mills, a policy analyst at Raymond James, indicated that despite Biden’s potential exit from the race, they would not immediately alter their electoral predictions of 60% for Trump versus 40% for Biden or Democratic candidates. He noted the possibility of a slowdown in the “Trump Trade” as the market reassesses the electoral landscape, but does not foresee a significant broader market reaction.