The stock market is poised for significant movement as it prepares to open tomorrow in light of President Joe Biden’s announcement that he will not seek reelection. This development is expected to create considerable volatility.
Jerome Powell’s keynote speech at the Jackson Hole symposium on Friday is anticipated to have a notable impact on the markets, providing investors with key insights into economic trends.
The announcement of Biden’s withdrawal brings heightened economic uncertainty as Democrats scramble to rally behind a new candidate, with Biden having endorsed Vice President Kamala Harris for the nomination.
According to Josh Thompson, CEO of Impact Health USA, if Biden were to formally announce his exit from the reelection race, the markets would likely experience immediate volatility. He noted that investors typically favor stability and predictability, and such a radical political shift could disrupt both.
This uncertainty might prompt investors to gravitate toward safe-haven assets such as gold, silver, and the Swiss franc, which are less susceptible to political and economic disruptions.
Additionally, there is potential for a slowdown in the “Trump Trade,” which has gained traction following former President Donald Trump’s debate performance against Biden and his survival of an assassination attempt. The “Trump Trade” reflects market behaviors responding to the prospect of another Trump administration, with sectors like healthcare, banking, cryptocurrency, oil, Tesla, and Trump Media and Technology Group expected to benefit from a second term.
Ed Mills, a policy analyst at Raymond James, indicated in a recent note to CNBC that, should Biden exit the race, they might not change their electoral odds, which currently stand at 60% for Trump and 40% for Biden/Democrats. He suggested that while the “Trump Trade” could stall as the market recalibrates in light of the new political landscape, he does not foresee a broader market reaction.