The stock market is expected to experience significant volatility when it opens tomorrow, following the announcement that President Joe Biden will not seek reelection. This development brings economic uncertainty to the forefront as the Democratic Party seeks to rally behind a new candidate, with Biden endorsing Vice President Kamala Harris as a potential nominee.
Josh Thompson, CEO of Impact Health USA, commented that if Biden withdraws, the immediate market reaction would likely include heightened volatility. Investors typically favor stability and predictability, and such a sudden political shift could disrupt those elements.
In response to this uncertainty, investors may gravitate towards safe-haven assets, including gold, silver, and the Swiss franc, which tend to be less affected by political and economic instability.
Additionally, there is the potential for a slowdown in what is being termed the “Trump Trade,” which has gained momentum since former President Donald Trump outperformed Biden in a debate and survived an assassination attempt. The Trump Trade reflects market behaviors and investor trading influenced by the anticipation of a second Trump administration. During his presidency, Trump was known to be pro-business, with sectors like healthcare, banking, cryptocurrency, oil, and stocks related to Tesla and Trump Media and Technology Group expected to benefit from another Trump term.
Ed Mills, a Washington policy analyst at Raymond James, noted in a report to CNBC that if Biden exits the race, they would not immediately adjust their electoral odds, estimating a 60% chance of Trump winning versus 40% for Biden or another Democrat. Mills suggested that any recent surge in the “Trump trade” may stall as the market reevaluates the political landscape, but he does not anticipate a wider reaction across the market.