The stock market is set to experience heightened volatility as it prepares for the announcement that President Joe Biden will not seek reelection. This news is expected to create economic uncertainty, especially as Democrats work to rally support behind a new candidate, with Biden endorsing Vice President Kamala Harris as his preferred successor.
Josh Thompson, CEO of Impact Health USA, commented on the likely 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. Investors generally prefer stability and predictability, and such a significant political shift would disrupt both.”
Investors may turn to safe-haven assets such as gold, silver, and the Swiss franc, which are typically less affected by political and economic upheavals.
Additionally, this development could lead to a slowdown in the so-called “Trump Trade,” which has gained traction following former President Donald Trump’s strong debate performance against Biden and his survival of a recent assassination attempt. The Trump Trade reflects the market’s behaviors based on the potential for a second Trump administration, which is viewed as favorable for various sectors, including healthcare, banking, cryptocurrency, oil stocks, and companies like Tesla and Trump Media and Technology Group.
Raymond James Washington policy analyst Ed Mills noted in a report shared with CNBC that while the electoral odds remain 60% in favor of Trump versus 40% for Biden or another Democrat, Biden’s departure could lead to a reassessment of the race without triggering a significant broader market reaction.