The stock market is expected to face significant volatility when it opens tomorrow, following the news that President Joe Biden will not seek reelection. This announcement brings economic uncertainty to the forefront as Democrats gather to support a new candidate, with Biden endorsing Vice President Kamala Harris as the likely nominee.
Experts predict that if Biden confirms his withdrawal from the race, the market is likely to react with uncertainty. Josh Thompson, CEO of Impact Health USA, stated that investors typically favor stability, and such a major political change would disrupt this preference.
In light of this uncertainty, investors may gravitate towards safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less affected by political and economic turbulence.
Additionally, there could be a slowdown in the so-called “Trump Trade,” a market trend that has gained momentum since former President Donald Trump outperformed Biden in debates and survived an assassination attempt. The Trump Trade reflects investor behavior anticipating a second Trump administration, as Trump proved to be favorable to business interests during his presidency. Sectors likely to benefit if Trump were to return to office include healthcare, banking, cryptocurrency, oil stocks, Tesla, and Trump Media and Technology Group.
Ed Mills, a policy analyst at Raymond James, indicated in a recent note shared with CNBC that even if Biden withdraws, they would not immediately alter their electoral odds, which currently stand at 60% for Trump and 40% for Biden or a Democrat. Mills mentioned that while there may be a temporary pause in the “Trump trade” as the market reassesses the political landscape, a broad market reaction is not anticipated.