The stock market is bracing for a volatile opening tomorrow following news that President Joe Biden will not seek reelection. This development could heighten economic uncertainty as Democrats rally to support a new candidate, with Biden endorsing Vice President Kamala Harris as a potential nominee.
Josh Thompson, CEO of Impact Health USA, commented that Biden’s withdrawal from the race would likely trigger immediate volatility and uncertainty in the markets. Investors typically favor situations that offer stability and predictability, and such a major political change could disrupt that balance.
In light of this uncertainty, investors may flock to safe-haven assets like gold, silver, and the Swiss franc, which tend to perform better during times of political and economic upheaval.
Moreover, there is a chance that the momentum of the “Trump Trade” could lose steam. This trading strategy emerged as former President Donald Trump began to surpass Biden in public debates and overcame an assassination attempt. The term refers to how investors react to the prospect of a second Trump administration. Trump, who previously built a successful business career, was seen as pro-business during his presidency. Sectors anticipated to benefit from a potential second Trump term include healthcare, banking, cryptocurrencies, oil stocks, Tesla, and Trump Media and Technology Group.
Despite the anticipated shift, Raymond James Washington policy analyst Ed Mills indicated that they would maintain their electoral odds at 60% for Trump and 40% for either Biden or another Democrat. He noted that while the recent Trump trade might stall as the market reassesses the political landscape, a broader market reaction is not expected.