The stock market is expected to experience volatility when it opens tomorrow following President Joe Biden’s declaration that he will not seek reelection. This development may lead to increased economic uncertainty as Democrats rally around a new candidate, with Biden endorsing Vice President Kamala Harris for the nomination.
Economic analysts predict that if Biden formally drops out of the race, the market reaction could be notable. “If President Biden were to announce his withdrawal from the reelection race, the immediate market reaction would likely be one of volatility and uncertainty,” stated Josh Thompson, CEO of Impact Health USA. “Investors generally prefer stability and predictability, and such a significant political shift would disrupt both.”
This uncertainty might encourage investors to shift towards safe-haven assets such as gold, silver, and the Swiss franc, which tend to be less affected by political and economic turbulence.
Additionally, the dynamics of the “Trump Trade,” which has gained momentum since former President Donald Trump’s strong debate performance against Biden and his survival of an assassination attempt, could be impacted. The Trump Trade reflects how investors behave based on the potential of a second Trump administration, focusing on sectors like healthcare, banking, cryptocurrency, oil stocks, Tesla, and Trump Media and Technology Group, all of which may benefit from a second term.
Analyst Ed Mills from Raymond James noted that while Biden’s exit could lead to a reassessment of the electoral landscape, “Should Biden leave the race, we would not immediately change our electoral odds (60% Trump vs. 40% Biden/Dem). We could see a stalling out of the recent ‘Trump trade’ as the market reassesses the race, but we do not see a broader market reaction.”