The stock market is set to experience fluctuations tomorrow following the announcement that President Joe Biden will not seek reelection. This decision is anticipated to create significant economic uncertainty as the Democratic Party works to rally support behind a new candidate, with Biden endorsing Vice President Kamala Harris as the nominee.
Josh Thompson, CEO of Impact Health USA, commented on the potential market reaction, saying, “If President Biden were to announce his withdrawal from the reelection race, the immediate market reaction would likely be one of volatility and uncertainty.” He noted that investors typically favor stability, and this political change could disrupt that stability.
As a result of this uncertainty, investors may gravitate towards so-called safe-haven assets, such as gold, silver, and the Swiss franc, which tend to be less influenced by political and economic instability.
Another potential outcome could be a slowdown in the so-called “Trump Trade,” which has gained momentum since the former president outperformed Biden in a debate and endured an assassination attempt. The “Trump Trade” describes market behaviors and investor strategies based on the prospects of a second term for Donald Trump. Historically, Trump has been viewed as favorable to business interests, with significant gains expected for sectors such as healthcare, banking, cryptocurrency, oil, and companies like Tesla and Trump Media and Technology Group should he win another term.
Raymond James Washington policy analyst Ed Mills noted, “Should Biden leave the race, we would not immediately change our electoral odds (60% Trump vs. 40% Biden/Dem). We could see a stalling out of the recent ‘Trump Trade’ as the market reassesses the race, but we do not see a broader market reaction.”