The stock market is poised for volatility with the news that President Joe Biden will not seek reelection. This announcement has significant implications for economic stability as Democrats rush to rally behind a new candidate. Biden has endorsed Vice President Kamala Harris to take his place.
Josh Thompson, CEO of Impact Health USA, stated over the weekend that if Biden officially announces his withdrawal from the race, the market is likely to react with uncertainty. “Investors generally prefer stability and predictability, and such a significant political shift would disrupt both,” he remarked.
In response to this uncertainty, investors might turn to safe-haven assets such as gold, silver, and the Swiss franc, which tend to fare better during periods of political and economic turbulence.
The market might also experience a slowdown in what has been referred to as the “Trump Trade.” This trade describes how investors react to the prospect of Donald Trump securing a second term after he recently performed well in a debate against Biden and survived an assassination attempt. A second Trump administration is anticipated to favor sectors such as healthcare, banking, cryptocurrencies, oil stocks, Tesla, and Trump Media and Technology Group.
Ed Mills, a policy analyst at Raymond James, noted that while a Biden exit from the race could momentarily stall the “Trump Trade” as the market reevaluates the political landscape, he does not foresee a significant overall market reaction. “We would not immediately change our electoral odds (60% Trump vs. 40% Biden/Dem),” he said in a note shared with CNBC last week.