Tomorrow, the stock market is expected to open amid significant volatility following the news that President Joe Biden has decided not to seek reelection. This development brings economic uncertainty to the forefront as the Democratic Party works swiftly to rally behind a new candidate, with Biden reportedly endorsing Vice President Kamala Harris for the nomination.
Josh Thompson, CEO of Impact Health USA, provided insights to Yahoo Finance, noting, “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 often seek stability and predictability, so such a major political shift could disrupt both.
In light of this uncertainty, investors might gravitate towards safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less affected by political and economic fluctuations.
Additionally, this situation could potentially stall the recent surge known as the “Trump Trade.” This trend has gained traction since former President Donald Trump outperformed Biden in a recent debate and survived an assassination attempt.
The term “Trump Trade” describes market behavior in response to the anticipated impact of a second Trump administration. Trump, who previously held a favorable stance towards business interests, is seen as a boon for sectors such as healthcare, banking, cryptocurrency, oil stocks, Tesla, and the Trump Media and Technology Group.
Ed Mills, a policy analyst at Raymond James, commented, “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 foresee a broader market reaction.”