The stock market is set to face potential volatility tomorrow following President Joe Biden’s announcement that he will not seek reelection. This decision brings economic uncertainty to the forefront as Democrats begin rallying behind a new candidate, with Biden endorsing Vice President Kamala Harris as his successor.
Josh Thompson, CEO of Impact Health USA, commented that a withdrawal from the race by Biden would likely trigger a period of instability in the markets. Investors typically favor stability and predictability, and such a major political shift is expected to disrupt that balance. This uncertainty may lead investors to seek refuge in safe-haven assets like gold, silver, and the Swiss franc, which are generally less affected by political and economic turmoil.
Another effect of Biden’s decision could be a stall in the momentum of the so-called “Trump Trade.” This term describes the behavior of the markets in response to the prospect of a second Trump administration, especially following the former president’s strong performance in recent debates and his survival of an assassination attempt. Historically, Trump has been perceived as favorable to business interests, particularly benefiting sectors such as healthcare, banking, cryptocurrency, and oil, as well as Tesla and Trump Media and Technology Group.
Despite the uncertainty, Raymond James Washington policy analyst Ed Mills indicated that the firm’s electoral odds would remain unchanged at 60% for Trump versus 40% for Biden or a Democrat. He noted that while there might be a reassessment of the market’s enthusiasm for the “Trump Trade,” a significant market reaction is not anticipated.