The stock market is set to react tomorrow following the announcement that President Joe Biden has decided not to seek reelection, leading to anticipated volatility.
Experts predict a surge in the stock market’s “fear index” as the electoral landscape changes. This announcement brings economic uncertainty to the forefront as the Democratic Party pivots to support a new candidate, with Biden endorsing Vice President Kamala Harris as his preferred successor.
Josh Thompson, CEO of Impact Health USA, expressed to Yahoo Finance that a declaration of Biden’s withdrawal would likely trigger immediate volatility in the markets. He noted that investors tend to favor stability, and significant political shifts can disrupt that.
In light of this uncertainty, investors may gravitate towards safe-haven assets such as gold, silver, and the Swiss franc, which are typically less affected by political and economic fluctuations.
Additionally, there is the potential for a slowdown in the so-called “Trump Trade,” which has gained momentum since Donald Trump’s recent successes, including outperforming Biden in debates and surviving an assassination attempt.
The “Trump Trade” describes the market response to the potential of a second Trump presidency, as he previously fostered a pro-business environment. Sectors likely to benefit from a Trump victory include healthcare, banking, cryptocurrency, oil stocks, Tesla, and Trump Media and Technology Group.
Raymond James Washington policy analyst Ed Mills mentioned in a note shared with CNBC that while Biden’s exit from the race might prompt a reassessment of market dynamics and a temporary halt in the Trump Trade, it would not fundamentally alter their electoral odds, which currently stand at 60% for Trump versus 40% for Biden or the Democratic candidate.