The stock market is set to react tomorrow to the revelation that President Joe Biden will not seek reelection, which is likely to lead to increased volatility.
Strategists believe that Jerome Powell’s comments at the Jackson Hole conference could significantly impact the markets.
The announcement has brought economic uncertainty to the forefront, especially as Democrats seek to rally behind a new candidate. Biden has already endorsed Vice President Kamala Harris for the nomination.
Josh Thompson, CEO of Impact Health USA, shared his insights over the weekend, stating that if Biden steps back from the reelection race, the market would likely experience volatility and uncertainty. “Investors generally prefer stability and predictability, and such a significant political shift would disrupt both,” he noted.
This atmosphere of uncertainty might lead investors to shift towards safer assets, such as gold, silver, and the Swiss franc, which tend to be less affected by political and economic fluctuations.
Another potential outcome could be a slowdown in the momentum of the so-called “Trump Trade,” which has gained traction following former President Donald Trump’s performance in debates and recent events involving his safety.
The “Trump Trade” describes investors’ behaviors in anticipation of a second Trump administration. Trump, known for his pro-business stance during his presidency, could positively impact sectors such as healthcare, banking, cryptocurrency, and oil stocks, as well as companies like Tesla and Trump Media and Technology Group.
Analyst Ed Mills from Raymond James shared a note with CNBC highlighting that should Biden withdraw from the race, they would not immediately alter their electoral predictions, estimating a 60% probability for Trump versus 40% for Biden or another Democratic nominee. Mills suggested that while the recent “Trump Trade” might pause as the market recalibrates, a broader market reaction is not expected.