The stock market is set to react tomorrow to the news that President Joe Biden will not seek reelection, bringing expected volatility.
The announcement has raised questions about who will succeed Bob Iger at Disney, with a Morgan Stanley executive leading the search for Iger’s replacement.
This political shift could introduce economic uncertainty as Democrats rally behind a new candidate, with Biden endorsing Vice President Kamala Harris as the likely nominee.
Josh Thompson, CEO of Impact Health USA, commented over the weekend, “If President Biden decides to withdraw from the reelection race, we can anticipate immediate market volatility and uncertainty. Investors typically prefer stability, and such a major political change would disrupt that.”
In response to potential uncertainty, investors may gravitate toward safe-haven assets like gold, silver, and the Swiss franc, which tend to be less affected by political and economic instability.
Additionally, there might be a pause in the “Trump Trade,” which has gained traction since Donald Trump, the former president and leading Republican candidate, outperformed Biden in debates and survived an assassination attempt.
The “Trump Trade” describes market behaviors and investor actions in light of the prospects of a second Trump administration. Trump, a former real estate executive, had a pro-business approach during his presidency, benefiting sectors like healthcare, banking, cryptocurrency, oil, Tesla, and Trump Media and Technology Group.
According to Ed Mills, a Washington policy analyst at Raymond James, “If Biden exits the race, we won’t immediately alter our electoral odds (60% Trump vs. 40% Biden/Dem). While we may see a cooling off of the recent ‘Trump trade’ as the market evaluates the race, we do not foresee a significant broader market response.”