Tomorrow, the stock market is expected to open amidst significant volatility, following the announcement that President Joe Biden will not seek reelection. This development could bring economic uncertainty to the forefront, as Democrats scramble to unify behind a new candidate, with Biden endorsing Vice President Kamala Harris for the nomination.
Market analysts predict that if Biden formally withdraws from the race, it would likely trigger immediate market volatility. According to Josh Thompson, CEO of Impact Health USA, investors typically prefer stability, and such a major political shift could disrupt that stability.
As a result of this uncertainty, investors may gravitate toward safe-haven assets, including gold, silver, and the Swiss franc, which tend to be less affected by political and economic fluctuations.
Additionally, there is the potential for a slowdown in what is being termed the “Trump Trade,” which has gained traction since former President Donald Trump outperformed Biden in a debate and survived an assassination attempt. This trade reflects market behavior and investor sentiment toward the prospect of a second Trump administration, which traditionally favors business-friendly policies that could benefit sectors such as healthcare, banking, cryptocurrency, oil, and companies like Tesla and Trump Media and Technology Group.
Ed Mills, a Washington policy analyst at Raymond James, indicated that even if Biden leaves the race, the electoral odds might remain unchanged at 60% in favor of Trump versus 40% for Biden or another Democrat. He stated that while a shift in the race could stall the current “Trump trade,” he does not foresee a broader market reaction.