The stock market is poised for a notable opening tomorrow following the announcement that President Joe Biden will not seek reelection, which is expected to incite volatility.
As economic uncertainty looms, investors are being urged to explore international stocks in light of the anticipated Federal Reserve rate cut decision. Strategists point out that Biden’s withdrawal could significantly alter market dynamics, prompting Democrats to swiftly rally around a new candidate, with Vice President Kamala Harris already receiving Biden’s endorsement for the nomination.
Josh Thompson, CEO of Impact Health USA, remarked that if Biden were to step down from the reelection race, the market reaction would likely be characterized by volatility and unpredictability. “Investors typically favor stability, and such a major political shift would disrupt that,” he noted.
This potential uncertainty may channel investor interest towards safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less affected by political and economic turmoil.
Furthermore, the market may experience a slowdown in the so-called “Trump Trade,” which has been gaining traction since former President Donald Trump outperformed Biden in a debate and survived an assassination attempt. This trade refers to investor behavior influenced by the prospect of a second Trump presidency, particularly benefiting sectors such as healthcare, banking, cryptocurrency, and oil, along with companies like Tesla and Trump Media and Technology Group.
Raymond James Washington policy analyst Ed Mills indicated that if Biden exits the race, electoral odds would not be immediately adjusted, still reflecting a 60% likelihood of Trump versus 40% for Biden or a Democrat. He suggested that while the “Trump trade” could stall as the market reevaluates the election landscape, a wider market reaction is not anticipated.