The stock market is set to experience notable volatility tomorrow following the announcement that President Joe Biden will not be seeking reelection. This news is expected to bring economic uncertainty to the forefront as Democrats rush to rally behind a new candidate, with Biden endorsing Vice President Kamala Harris for the nomination.
Josh Thompson, CEO of Impact Health USA, commented on the potential market reaction, stating, “If President Biden were to announce his withdrawal from the reelection race, the immediate market reaction would likely be one of volatility and uncertainty.” He emphasized that investors typically favor stability and certainty, and such a significant political shift could disrupt that.
In light of this uncertainty, investors might gravitate towards safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less affected by political and economic instability.
Additionally, there is a possibility that the so-called “Trump Trade” could lose momentum. This trading phenomenon has gained traction since former President Donald Trump outperformed Biden during a debate and survived an assassination attempt. The Trump Trade reflects market behavior and investor activity in anticipation of a second Trump administration. Trump, known for his business-friendly policies, could benefit certain sectors, including healthcare, banking, cryptocurrency, oil stocks, and companies like Tesla and Trump Media and Technology Group.
Ed Mills, a Washington policy analyst from Raymond James, stated in a note to CNBC, “Should Biden leave the race, we would not immediately change our electoral odds (60% Trump vs. 40% Biden/Dem). We could see a stalling out of the recent ‘Trump trade’ as the market reassesses the race, but we do not see a broader market reaction.”