The Democratic party’s mounting pressure for President Joe Biden to withdraw from the presidential race has resulted in his decision to step down today. Despite endorsing Vice President Kamala Harris as his successor, Democrats retain the option to nominate an alternative candidate.
What implications will this have for the economy, particularly the stock market? Here’s a look at expert opinions on the matter.
Immediate Market Reaction: Increased Volatility
Several experts argue that Biden’s exit will heighten market volatility. According to Josh Thompson, CEO of Impact Health USA, “Investors generally prefer stability and predictability, and such a significant political shift would disrupt both.” He anticipates a potential sharp decline in stock prices as investors seek to hedge against risks.
Michael Collins, CFA, founder and CEO of WinCap Financial, shares this view, noting that a change in leadership could lead to uncertainty and volatility. “Investors may react differently depending on the new frontrunner for the Democratic party and their perceived economic policies,” he said.
READ MORE: Was Trump’s Attempted Assassination The Final Nail In Biden’s Political Coffin?
Potential Impact on U.S. Equities
Regarding specific sectors, some experts suggest that Biden’s withdrawal could benefit U.S. equities. Timothy Holland, CFA, Chief Investment Officer at Orion, speculates that Harris, as Biden’s likely replacement, might be seen as a weaker candidate against Trump. However, he believes this scenario could support U.S. equities as markets consider potential fiscal policies akin to extending the Trump Tax Cuts and increased government spending, especially on defense.
Stephanie Vaughan, co-founder of Veda, agrees, stating that Harris’ nomination could favor U.S. equities due to Trump’s pro-growth and pro-innovation stance.
Potential Benefits for Gold and Silver
Peter Earle, Senior Economist at the American Institute for Economic Research, emphasizes that reactions will hinge on the nominated candidate. He predicts uncertainty until the nomination is confirmed, which typically favors safe-haven assets like gold and silver. “Investors will seek a store of value amidst uncertainty about whether the new candidate will continue or diverge from Biden’s policies,” Earle remarked.
Impact on Bonds
Timothy Holland also addresses the impact on bonds, noting that bond yields and prices could fluctuate based on market perceptions of the new Democratic candidate’s strength against Trump. He highlights potential inflationary concerns related to anticipated fiscal policies.
Potential Impact on Crypto
Stephanie Vaughan suggests a potential rally in crypto markets following Biden’s withdrawal, attributing this to expectations of a more crypto-friendly environment under a Trump presidency.
In conclusion, the withdrawal of a sitting president from reelection is unprecedented and likely to inject caution into the market, with a preference for stable investments over riskier assets, as observed by Josh Thompson.
ALSO READ: Breaking Barriers: Kamala Harris’ Journey From Activist To US Presidential Candidate
