President Joe Biden’s announcement that he will not seek reelection is set to create significant volatility in the stock market when it opens tomorrow. The development has sparked economic uncertainty as Democrats rush to consolidate support for a new candidate, with Biden endorsing Vice President Kamala Harris to succeed him.
Josh Thompson, CEO of Impact Health USA, indicated that such a political shift will likely lead to a turbulent market response. “If President Biden were to announce his withdrawal from the reelection race, the immediate market reaction would likely be one of volatility and uncertainty. Investors generally prefer stability and predictability, and such a significant political shift would disrupt both,” Thompson noted over the weekend.
This uncertainty may drive investors towards safer assets, such as gold, silver, and the Swiss franc, which typically perform better in times of political and economic instability.
Additionally, the situation may hinder the momentum of the “Trump Trade,” which has gained traction since former President Donald Trump outperformed Biden in a debate and narrowly escaped an assassination attempt. The “Trump Trade” reflects how market behaviors and investor actions align with the possibility of a second Trump presidency, particularly favoring sectors like healthcare, banking, cryptocurrency, and oil, along with Tesla and Trump Media and Technology Group.
Raymond James Washington policy analyst Ed Mills commented on the potential impact, suggesting that while the market may reassess its outlook if Biden withdraws, immediate changes to electoral odds are unlikely. “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,” Mills stated in a note shared with CNBC last week.