The stock market is set to react tomorrow following the news that President Joe Biden has decided not to seek reelection, a development likely to create significant volatility.
This announcement brings forth economic uncertainty as Democrats work quickly to rally support around a new candidate. Biden has endorsed Vice President Kamala Harris as his preferred nominee.
Josh Thompson, CEO of Impact Health USA, commented on the anticipated market response, stating, “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.”
In light of this uncertainty, investors may turn to safe-haven assets such as gold, silver, and the Swiss franc, which are typically less affected by political and economic instability.
Additionally, there is potential for a slowdown in what is known as the “Trump Trade,” which has gained momentum since former President Donald Trump outperformed Biden in a recent debate and survived an assassination attempt. The “Trump Trade” reflects investors’ reactions to the prospect of another Trump administration, a scenario that is seen as favorable for certain sectors such as healthcare, banking, cryptocurrency, oil stocks, and companies like Tesla and Trump Media and Technology Group.
Raymond James Washington policy analyst Ed Mills highlighted that, “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.”