The stock market is expected to experience volatility when it opens tomorrow following the news that President Joe Biden will not seek reelection. This announcement is likely to raise economic uncertainty as Democrats hurriedly back a new candidate, with Biden endorsing Vice President Kamala Harris for the nomination.
Josh Thompson, CEO of Impact Health USA, told Yahoo Finance over the weekend that if Biden withdraws from the race, the market’s immediate reaction would likely reflect volatility and uncertainty. Investors typically favor stability and predictability, and such a significant political shift would disrupt those factors.
In light of this uncertainty, investors may shift their focus toward safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less affected by political and economic instability.
There is also a possibility that the momentum behind the “Trump Trade” could stall. This trade refers to market behaviors and investment strategies related to the prospect of a second Trump presidency. Since former President Donald Trump performed strongly in a recent debate against Biden and survived an assassination attempt, investor confidence in his return has been building. Sectors likely to benefit from a second Trump administration include healthcare, banking, cryptocurrency, oil stocks, as well as Tesla and Trump Media and Technology Group.
Ed Mills, a policy analyst at Raymond James, mentioned last week that if Biden exits the race, they would not immediately adjust their electoral odds (60% Trump to 40% Biden/Dem). He noted the possibility of a slowdown in the “Trump Trade” as the market reevaluates the political landscape, but he does not anticipate a widespread market downturn.