The stock market is set to experience significant volatility as President Joe Biden announces he will not seek reelection, potentially leading to economic uncertainty. This decision is expected to prompt a swift response from the Democratic Party as they rally behind a new candidate, with Biden having endorsed Vice President Kamala Harris as his preferred nominee.
Josh Thompson, CEO of Impact Health USA, commented on this potential shift, stating that such a withdrawal would likely trigger market instability. “Investors generally prefer stability and predictability, and such a significant political shift would disrupt both,” he explained to Yahoo Finance over the weekend.
In light of this uncertainty, investors may gravitate towards safe-haven assets such as gold, silver, and the Swiss franc, which typically respond differently to political and economic unrest.
The announcement could also affect the so-called “Trump Trade,” which has gained momentum following former President Donald Trump’s debate performance against Biden and his survival of an assassination attempt. The “Trump Trade” refers to market behaviors influenced by the anticipation of another Trump presidency. Notable sectors poised to benefit include healthcare, banking, cryptocurrency, and oil, along with Tesla and the Trump Media and Technology Group.
Raymond James Washington policy analyst Ed Mills noted that while Biden’s withdrawal could lead to a reassessment of the elections, he does not foresee a significant market reaction right away. “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,” he stated in a report shared with CNBC last week.