The stock market is set to react tomorrow to the announcement that President Joe Biden will not seek reelection, likely leading to increased volatility.
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The political decision introduces a wave of economic uncertainty as Democrats quickly rally to support a new candidate, with Biden endorsing Vice President Kamala Harris as the presumptive nominee.
Josh Thompson, CEO of Impact Health USA, remarked, “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.”
In light of this uncertainty, investors may gravitate towards safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less sensitive to political and economic fluctuations.
Additionally, this development may impact the so-called “Trump Trade,” which has gained momentum following Donald Trump’s strong debate performances and his survival of an assassination attempt. This trade reflects market behaviors and investor reactions anticipating a second Trump administration. Trump, known for his business-friendly policies during his presidency, has left investors optimistic about sectors like healthcare, banking, cryptocurrency, oil stocks, Tesla, and his own Trump Media and Technology Group should he return to office.
Ed Mills, a Washington policy analyst at Raymond James, noted that while Biden’s exit could lead to a reassessment of the electoral landscape, they would not immediately change their electoral odds, currently estimating a 60% chance for Trump versus 40% for Biden or a Democratic candidate. Mills conveyed that while the recent “Trump trade” might stall as the race is reassessed, a broader market reaction is not anticipated.