The stock market is set to react tomorrow as President Joe Biden announces he will not seek reelection, raising expectations of volatility. This decision adds economic uncertainty as the Democratic Party rallies behind a potential new candidate, with Biden endorsing Vice President Kamala Harris for the nomination.
Josh Thompson, CEO of Impact Health USA, indicated that such a significant political shift would likely lead to market instability. “If President Biden were to announce his withdrawal from the reelection race, the immediate market reaction would likely be one of volatility and uncertainty,” he said. Investors typically favor stability and predictability, which may be disrupted by this announcement.
The uncertainty could push investors toward safe-haven assets like gold, silver, and the Swiss franc, which tend to be less affected by political and economic turmoil.
Additionally, this news may stall the so-called “Trump Trade,” which has gained momentum following former President Donald Trump’s strong performance in debates and a recent assassination attempt against him. The Trump Trade reflects how market behaviors change in anticipation of a potential second Trump administration, with expected beneficiaries including healthcare, banking, cryptocurrency, and oil stocks, along with Tesla and Trump Media and Technology Group.
Raymond James’ Washington policy analyst Ed Mills noted that while Biden’s exit could stall the recent Trump trade, the firm does not anticipate a significant broader market reaction. The current electoral odds are seen as 60% favoring Trump and 40% for Biden or another Democrat candidate.