The stock market is set to experience notable volatility tomorrow following the announcement that President Joe Biden will not be seeking reelection. This decision introduces significant economic uncertainty as the Democratic Party seeks to rally behind a new candidate, with Biden endorsing Vice President Kamala Harris to take his place.
Experts suggest that if Biden confirms his departure from the race, investors may respond with heightened volatility and uncertainty in the markets. Josh Thompson, CEO of Impact Health USA, indicated that investors typically favor stability, and such a major political shift could disrupt that stability.
In light of the potential for turbulence, investors might turn to safe-haven assets like gold, silver, and the Swiss franc, which tend to be more resilient in times of political and economic unrest.
One important aspect to consider is the potential slowdown of the so-called “Trump Trade,” a market phenomenon linked to the prospect of Donald Trump, the former president and current Republican candidate, returning to office. This trade gained momentum after Trump’s strong debate performance against Biden and amidst other significant events.
The “Trump Trade” refers to the market’s tendencies to react positively to the prospect of another Trump administration, particularly benefiting sectors such as healthcare, banking, cryptocurrency, oil, and companies like Tesla and the Trump Media and Technology Group.
Despite the looming uncertainty, Raymond James policy analyst Ed Mills mentioned that they would not immediately revise their electoral forecasts, which stand at 60% in favor of Trump compared to 40% for Biden or the Democrats. Mills suggested that while there may be a temporary stall in the recent “Trump trade” as market participants reassess the political landscape, broader market reactions should remain muted.