The stock market is set to react tomorrow to the announcement that President Joe Biden will not be seeking reelection, a development that is likely to introduce significant volatility.
This decision creates a wave of economic uncertainty as the Democratic Party hastens to rally behind a new candidate, with Biden having endorsed Vice President Kamala Harris for the nomination.
“If President Biden were to announce his withdrawal from the reelection race, the immediate market reaction would likely be one of volatility and uncertainty,” stated Josh Thompson, CEO of Impact Health USA, in a recent interview. “Investors generally prefer stability and predictability, and such a significant political shift would disrupt both.”
This uncertainty may drive investors towards safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less affected by political and economic instability.
Additionally, this situation may cause a pause in the so-called “Trump Trade,” which has gained momentum since former President Donald Trump surpassed Biden in a recent debate and survived an assassination attempt.
The “Trump Trade” refers to market trends shaped by investor behavior in anticipation of a second Trump administration. Trump’s presidency was viewed favorably by business interests, and sectors such as healthcare, banking, cryptocurrency, oil, Tesla, and Trump Media and Technology Group could be positioned to benefit from another term.
“Should Biden leave the race, we would not immediately change our electoral odds (60% Trump vs. 40% Biden/Dem). While we could see a stall in the recent ‘Trump Trade’ as the market reassesses the race, we do not anticipate a broader market response,” noted Ed Mills, a Washington policy analyst at Raymond James, in remarks shared with CNBC last week.