The stock market is set to react tomorrow to the news that President Joe Biden will not be seeking reelection, leading to anticipated volatility.
Strategists suggest that investors should favor a divided Congress in light of this development. Biden’s decision to step back will likely exacerbate economic uncertainty, as Democrats begin to coalesce around a new candidate, with Biden endorsing Vice President Kamala Harris for the nomination.
Josh Thompson, CEO of Impact Health USA, commented on the potential market impact, stating, “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 drive investors toward safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less affected by political and economic turmoil.
Additionally, the news could also lead to a slowdown in the “Trump Trade,” a market trend that gained traction after former President Donald Trump outperformed Biden in a recent debate and survived an assassination attempt. The “Trump Trade” refers to market behaviors and trading patterns aligned with the expectations of a second Trump administration. Trump’s first term was characterized by policies favorable to business, benefitting sectors including healthcare, banking, cryptocurrency, oil stocks, Tesla, and the Trump Media and Technology Group.
Ed Mills, a policy analyst at Raymond James, noted that if Biden withdraws, there would not be an immediate adjustment in electoral odds, currently assessed at 60% for Trump versus 40% for Biden or another Democratic candidate. Mills suggested that while the market might pause in its recent “Trump Trade” momentum as it reassesses the political landscape, he does not foresee a widespread market shift.