The stock market is expected to react to the news that President Joe Biden is not seeking reelection, leading to anticipated volatility. Investors are on alert as they prepare for Federal Reserve Chair Jerome Powell’s keynote address at the Jackson Hole symposium on Friday, which could influence market movements.
With Biden’s decision, economic uncertainty is likely to take center stage, prompting Democrats to quickly rally behind a potential new candidate, with Biden endorsing Vice President Kamala Harris as a possible nominee.
According to Josh Thompson, CEO of Impact Health USA, should Biden announce his exit from the race, the market would likely experience immediate volatility. “Investors generally prefer stability and predictability,” he noted, emphasizing that such a significant political shift could disrupt this.
The resulting uncertainty might lead investors to seek safe-haven assets, such as gold, silver, and the Swiss franc, which tend to be less affected by political and economic turmoil.
Additionally, this situation could hinder the momentum of the so-called “Trump Trade.” This term describes market behavior associated with the prospect of another Trump presidency, especially following Trump’s debate performance against Biden and an assassination attempt.
Investors have shown particular interest in sectors that may thrive under a second Trump administration, including healthcare, banking, cryptocurrency, oil, and companies like Tesla and Trump Media and Technology Group.
Despite potential market reassessments, Raymond James Washington policy analyst Ed Mills indicated that if Biden steps aside, the electoral odds may not shift immediately, suggesting a sustained likelihood of a Trump candidacy. Mills stated, “We do not see a broader market reaction,” despite the expectation of a pause in the recent “Trump trade.”