The stock market is poised for volatility tomorrow as news breaks that President Joe Biden will not seek reelection. This announcement has significant implications for economic stability as Democrats quickly rally 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 potential immediate market impact, 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 response to the political uncertainty, investors might gravitate towards safe-haven assets such as gold, silver, and the Swiss franc, which tend to perform better during times of economic unpredictability.
Moreover, there may be a slowdown in the “Trump Trade,” a term that describes market behavior influenced by expectations surrounding former President Donald Trump’s potential return to office. This trading strategy gained traction after Trump’s strong performance in a recent debate and an assassination attempt against him.
The “Trump Trade” suggests that certain sectors, including healthcare, banking, cryptocurrency, and oil stocks, along with Tesla and Trump Media and Technology Group, could benefit from a second Trump administration.
Ed Mills, a Washington policy analyst at Raymond James, noted that if Biden exits the race, they would not immediately adjust their electoral odds, currently at 60% in favor of Trump versus 40% for Biden or another Democrat. “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,” he stated in a note shared with CNBC.