The stock market is set to react tomorrow following the announcement that President Joe Biden will not seek reelection, leading to anticipated volatility. This announcement raises significant economic uncertainty as Democrats accelerate their efforts to rally support behind a new candidate, with Biden endorsing Vice President Kamala Harris as a potential nominee.
Josh Thompson, CEO of Impact Health USA, commented on the likely market response, 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.”
In light of this uncertainty, investors may gravitate toward safe-haven assets such as gold, silver, and the Swiss franc, which tend to hold their value better during periods of political and economic instability.
Additionally, the announcement could impact the so-called “Trump Trade,” which has gained momentum since former President Donald Trump outperformed Biden in a recent debate and survived an assassination attempt. The Trump Trade reflects how investors react to the prospect of a second Trump administration, which is viewed as favorable for sectors like healthcare, banking, cryptocurrency, oil, and tech companies including Tesla.
Ed Mills, a policy analyst at Raymond James, noted that while a potential Biden withdrawal might prompt a reassessment of the electoral landscape, he does not foresee sweeping changes in the market’s overall direction. He stated, “Should Biden leave the race, we would not immediately change our electoral odds (60% Trump vs. 40% Biden/Dem). We could see a stalling out of the recent ‘Trump trade’ as the market reassesses the race, but we do not see a broader market reaction.”