The stock market is set to experience opening volatility as news emerges that President Joe Biden will not seek reelection. This development could heighten economic uncertainty, particularly as Democrats rally behind a potential new candidate, with Biden supporting Vice President Kamala Harris for the nomination.
Josh Thompson, CEO of Impact Health USA, commented that if Biden officially announces his decision not to run, the market is likely to react with volatility and uncertainty. Investors typically favor stability, and such a significant political change could upset this.
In response to increasing uncertainty, investors may flock to safe-haven assets such as gold, silver, and the Swiss franc, which generally perform better during times of political and economic turmoil.
Another impact of this situation could be a slowdown in the so-called “Trump Trade.” This term describes market movements and investor behavior in relation to the prospect of a second Trump presidency, which has gained momentum following former President Donald Trump’s impressive debate performance against Biden and an assassination attempt that he survived.
The “Trump Trade” has been characterized by positive market behaviors toward industries like healthcare, banking, cryptocurrencies, oil, and companies like Tesla, as well as Trump Media and Technology Group.
Ed Mills, a policy analyst at Raymond James, noted that while they would not immediately adjust their electoral odds to reflect Biden’s withdrawal (currently at 60% for Trump versus 40% for Biden/Democrats), there could be a temporary halt in the “Trump Trade” as the market reevaluates the political landscape. However, he does not anticipate a widespread market downturn.