The stock market is set to react tomorrow to the news that President Joe Biden has decided not to seek reelection, a move that is expected to introduce significant volatility.
The announcement is likely to raise economic uncertainties as Democrats quickly rally to support a new candidate, with Biden endorsing Vice President Kamala Harris as the potential nominee.
Josh Thompson, CEO of Impact Health USA, noted over the weekend that if Biden were to officially withdraw from the race, the immediate market response would probably be marked by volatility and uncertainty. He emphasized that investors typically favor stability and predictability, and a major political change could disrupt both.
This uncertainty may lead investors to shift toward safer assets, such as gold, silver, and the Swiss franc, which tend to be less sensitive to political and economic instability.
Additionally, the market may experience a slowdown in the “Trump Trade,” which has gained traction following Donald Trump’s strong debate performance against Biden and his recent survival of an assassination attempt. The “Trump Trade” reflects how investors position themselves in anticipation of a potential second Trump administration. Trump’s presidency was seen as favorable to business, benefiting sectors like healthcare, banking, cryptocurrency, oil, as well as companies like Tesla and the Trump Media and Technology Group.
Ed Mills, a Washington policy analyst at Raymond James, mentioned in a recent note to CNBC that while they might not immediately adjust their electoral odds (currently favoring Trump at 60% versus 40% for Biden and the Democrats), they could see a temporary halt in the recent “Trump trade” as the market reevaluates the political landscape, though he does not foresee a significant broader market impact.