The stock market is poised for a significant opening tomorrow following President Joe Biden’s announcement that he will not seek reelection, with expectations of increased volatility.
Analysts stress that the incoming president will inherit a debt dilemma that could pose serious challenges. The impending transition is likely to heighten economic uncertainty as Democratic leaders quickly rally to support a new candidate, with Biden having endorsed Vice President Kamala Harris as his successor.
Josh Thompson, CEO of Impact Health USA, stated over the weekend, “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.”
This uncertainty may lead investors to seek refuge in safer assets, such as gold, silver, and the Swiss franc, which tend to perform better during times of political and economic instability.
Additionally, analysts anticipate a potential slowdown in the so-called “Trump Trade.” This trading phenomenon has gained momentum since former President Donald Trump, the Republican presidential nominee, dominated Biden in a recent debate and survived a serious threat to his life.
The “Trump Trade” epitomizes how market behaviors shift in response to the prospect of Trump’s return to office. During his presidency, Trump, who previously faced failures in several business ventures, was known for his pro-business stance. Sectors expected to thrive under a second Trump presidency include healthcare, banking, cryptocurrency, oil, and notably, Tesla and Trump Media and Technology Group.
Ed Mills, a Washington policy analyst at Raymond James, indicated in a note to CNBC last week that even if Biden exits the race, they would not immediately alter their electoral probabilities (currently 60% in favor of Trump and 40% for Biden/Democrats). He noted that while there might be a pause in the current “Trump trade” as the market reevaluates the political landscape, a broader market reaction is not anticipated.