The stock market is set to face heightened volatility tomorrow following news that President Joe Biden will not seek reelection. This announcement could create economic uncertainty as Democrats work to rally support behind a new candidate, with Biden endorsing Vice President Kamala Harris as the likely nominee.
Josh Thompson, CEO of Impact Health USA, noted that a potential withdrawal from the reelection race by Biden would likely lead to market instability. He explained that investors typically favor stability and predictability, and any significant political change could disrupt that environment.
In light of this uncertainty, investors might turn to safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less sensitive to political and economic fluctuations.
Additionally, there is concern that the so-called “Trump Trade” could stall. This trade refers to the stock market’s behavior in anticipation of a second Trump administration, especially after the former president’s strong debate performance and his survival from an assassination attempt. During his presidency, Trump was known for his pro-business stance, which benefitted various sectors, including healthcare, banking, cryptocurrency, and oil stocks, as well as Tesla and the Trump Media and Technology Group.
Raymond James policy analyst Ed Mills commented that while immediate changes to electoral odds might not occur—currently estimated at 60% for Trump versus 40% for Biden or another Democrat—the market may take a moment to reassess the political landscape, leading to a potential pause in the recent “Trump Trade.”