The stock market is set to open tomorrow amid heightened expectations of volatility following the news that President Joe Biden will not seek reelection. This announcement brings economic uncertainty to the forefront as Democrats swiftly rally behind a new candidate, with Biden endorsing Vice President Kamala Harris for the nomination.
Josh Thompson, CEO of Impact Health USA, commented on the potential market implications of Biden’s decision. He noted that if Biden officially withdraws from the race, the immediate reaction is likely to be one of volatility and uncertainty. Investors tend to favor stability, and such a substantial political shift could disrupt the market’s equilibrium.
In light of this uncertainty, investors might gravitate toward so-called safe-haven assets, such as gold, silver, and the Swiss franc, which tend to be more resilient during periods of political and economic instability.
Additionally, this development could impact the so-called “Trump Trade,” a market phenomenon that has gained traction following former President Donald Trump’s strong debate performance against Biden and his survival of an assassination attempt. The Trump Trade encapsulates how the market reacts to the prospect of a second Trump administration, with significant gains expected in sectors like healthcare, banking, cryptocurrency, and oil, as well as Tesla and Trump Media and Technology Group.
Despite the potential for short-term adjustments, Raymond James Washington policy analyst Ed Mills stated that they would not immediately alter their electoral odds, currently set at 60% for Trump versus 40% for Biden or another Democratic candidate. Mills suggested the market might pause the recent Trump Trade as it reevaluates the electoral landscape, but he does not anticipate a widespread reaction across the market.