The stock market is poised for a tumultuous opening tomorrow following the announcement that President Joe Biden will not be seeking reelection, which is expected to trigger significant volatility.
Strategists suggest that investors would benefit from a divided Congress. The impending decision is likely to intensify economic uncertainty as Democrats scramble to rally behind a new candidate, with Biden endorsing Vice President Kamala Harris as his preferred choice.
Josh Thompson, CEO of Impact Health USA, remarked, “If President Biden were to announce his withdrawal from the reelection race, the immediate market reaction would likely be one of volatility and uncertainty. Investors generally prefer stability and predictability, and such a significant political shift would disrupt both.”
This uncertainty could lead investors to seek out safe-haven assets such as gold, silver, and the Swiss franc, which tend to perform better during times of political and economic instability.
Additionally, the announcement may stall momentum in what has been dubbed the “Trump Trade,” which has gained traction since former President Donald Trump outperformed Biden in a debate and survived an assassination attempt. The “Trump Trade” reflects market behaviors and investor trends in anticipation of a potential Trump administration.
Trump, known for his business-friendly policies during his presidency, is seen as favorable for various sectors including healthcare, banking, cryptocurrency, and oil stocks, alongside companies like Tesla and the Trump Media and Technology Group.
Ed Mills, a Washington policy analyst at Raymond James, indicated in a note that despite Biden’s withdrawal potentially impacting electoral dynamics, they do not plan to adjust their electoral odds significantly (60% for Trump versus 40% for Biden/Democrats). He added that while a reassessment of the race may stall the recent “Trump trade,” he does not anticipate a broader market impact.