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Volatility is almost certain as stock markets open tomorrow on the news that President Joe Biden will not run for reelection.
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The decision brings economic uncertainty to the forefront as Democrats compete to endorse new candidates (Biden has endorsed Vice President Kamala Harris as his nominee).
“If President Biden were to announce his withdrawal from the reelection race, the immediate market reaction would likely be volatility and uncertainty,” Josh Thompson, CEO of Impact Health USA, told Yahoo Finance! over the weekend. “Investors generally like stability and predictability, and a major political shift like this would disrupt both.”
Such uncertainty could push investors towards so-called safe haven assets such as gold, silver and the Swiss franc, which are less sensitive to political and economic uncertainty.
Another possibility is the stalling of the “Trump trade,” which has been gaining momentum since former president and Republican presidential nominee Donald Trump beat Biden in the debate and survived an assassination attempt.
Trump Trade refers to the market trends and how investors trade on the promises of the second Trump administration. As a real estate mogul, Trump has had a number of failed ventures, but as a president he has been very business-friendly. The big beneficiaries of the second Trump administration are expected to be healthcare, banking, cryptocurrency, oil stocks, Tesla, and of course the Trump Media Technology Group.
“If Biden were to drop out of the race, we would not immediately change our election odds (60% Trump, 40% Biden/Democrats). The recent ‘Trump trade’ may stall as the market reassess the race, but we do not see a broader market reaction,” Ed Mills, a policy analyst at Raymond James Washington, said in a note shared with CNBC last week.
Will Gavin contributed to this article.
