The stock market is set to experience significant volatility as it opens tomorrow, following the announcement that President Joe Biden will not run for reelection. This news comes as economic uncertainty looms large, prompting Democrats to rally behind a new candidate, with Biden endorsing Vice President Kamala Harris as the nominee.
Josh Thompson, CEO of Impact Health USA, noted that the market’s initial reaction to Biden’s withdrawal would likely be characterized by volatility and uncertainty. Investors typically favor stability, and such a major political change could disrupt that stability.
In light of this uncertainty, many 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 fluctuations.
Additionally, this development could stall what is referred to as the “Trump Trade.” This term describes how investors have traded in response to the prospect of a second Trump administration, gaining traction since former president Donald Trump surpassed Biden in a debate and faced an assassination attempt.
The Trump Trade signals investor behavior anticipating benefits for various sectors, including healthcare, banking, cryptocurrency, and oil stocks, in the event of a second term for Trump. Companies like Tesla and the Trump Media and Technology Group are also expected to benefit.
Raymond James policy analyst Ed Mills commented that while Biden’s exit from the race could momentarily halt the Trump trade, they do not anticipate a significant overall reaction from the market. Currently, the odds are suggested to be 60% in favor of Trump compared to 40% for Biden or another Democrat.