The stock market is set to experience significant volatility with the news that President Joe Biden has decided not to seek reelection. This announcement comes as Democrats rush to unify behind a new candidate, with Biden endorsing Vice President Kamala Harris as a potential nominee.
Josh Thompson, CEO of Impact Health USA, stated that if Biden officially withdraws from the race, the market is likely to react with heightened volatility and uncertainty. Investors typically favor stability, and such a major political change could disrupt the current economic landscape.
In response to this uncertainty, investors may shift towards safer assets like gold, silver, and the Swiss franc, which tend to be more resilient in times of political and economic instability.
Additionally, there could be a slowdown in what has been termed the “Trump Trade.” This trend has gained traction since former President Donald Trump demonstrated stronger debate performances than Biden and survived an assassination attempt. The Trump Trade encompasses market behaviors linked to the potential return of a Trump administration, which many believe would benefit sectors such as healthcare, banking, cryptocurrency, and oil, including companies like Tesla and Trump Media and Technology Group.
Ed Mills, a policy analyst at Raymond James, noted that while an exit by Biden from the race could stall the current momentum of the “Trump Trade,” it may not lead to drastic shifts in overall market expectations, currently estimated at 60% in favor of Trump versus 40% for Biden or another Democrat.