The stock market is anticipated to experience heightened volatility tomorrow following President Joe Biden’s announcement that he will not seek reelection. This development will bring economic uncertainty to the forefront as Democrats quickly rally to support a new candidate, with Biden endorsing Vice President Kamala Harris as the nominee.
Josh Thompson, CEO of Impact Health USA, commented on the potential market implications, stating that “if President Biden were to announce his withdrawal from the reelection race, the immediate market reaction would likely be one of volatility and uncertainty.” He noted that investors typically favor stability and predictability, and such a major political change could upset both.
In light of this uncertainty, investors may lean towards safe-haven assets like gold, silver, and the Swiss franc, which tend to be less impacted by political and economic turmoil.
Additionally, this announcement could lead to a slowdown of the so-called “Trump Trade,” which has gained traction since former President Donald Trump bested Biden in a debate and survived an assassination attempt. The Trump Trade refers to the market’s reaction to the expectation of a second Trump term, with specific sectors like healthcare, banking, cryptocurrency, and oil, as well as companies like Tesla and Trump Media and Technology Group, potentially benefiting.
Ed Mills, a Washington policy analyst at Raymond James, indicated that while Biden’s exit from the race might not lead to an immediate reevaluation of electoral odds—currently viewed as 60% in favor of Trump versus 40% for Biden or another Democrat—the market might reassess its stance on the Trump Trade but is not expected to react more broadly.