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The stock market will open up tomorrow to the news that President Joe Biden will not be running for reelection, and volatility is nearly guaranteed.
The decision will bring economic uncertainty to the forefront as Democrats race to put their support behind a new candidate (Biden endorsed Vice President Kamala Harris to be the nominee).
“If President Biden were to announce his withdrawal from the reelection race, the immediate market reaction would likely be one of volatility and uncertainty,” Josh Thompson, CEO of Impact Health USA, told Yahoo Finance! over the weekend. “Investors generally prefer stability and predictability, and such a significant political shift would disrupt both.”
That uncertainty could push investors toward so-called safe-haven assets, like gold, silver, and the Swiss franc, that are less reactive to political and economic uncertainty.
Another possibility is a stalling out of the “Trump Trade,” which has been gaining steam since former president and Republican presidential nominee Donald Trump outperformed Biden on a debate stage and survived an assassination attempt.
The Trump Trade refers to the market’s behaviors and how investors trade in response to the promise of a second Trump administration. Trump, a former real estate mogul who has crashed and burned in a number of other ventures, was very friendly to business interests as president. Some big beneficiaries of a second Trump presidency are expected to be healthcare, bank, cryptocurrency, and oil stocks, as well as Tesla and of course Trump Media and Technology Group.
“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,” Raymond James Washington policy analyst Ed Mills said in a note shared with CNBC last week.