What Does Joe Biden's Withdrawal from US Presidential Race Mean for Markets?

The determination by President Joe Biden to driblet his re-election bid and propulsion his support down Vice President Kamala Harris added a new, if not wholly unexpected, wrinkle to nan outlook for financial markets.

Most of nan Democratic statement quickly rallied astir Harris, though her information is by nary intends guaranteed. Polls show Harris somewhat outperforming Biden successful a head-to-head pinch Trump, though nan reliability of these polls is highly uncertain fixed really quickly nan scenery has changed successful caller days.

Analysts were mixed astir nan effect Biden’s determination would person connected some nan predetermination and nan market. 

“The prediction market-implied likelihood of Democrats winning nan White House roseate a fewer points but remains somewhat little than 40%,” wrote Goldman Sachs analysts successful a statement Monday. The likelihood of a “Republican sweep” decreased somewhat connected Sunday’s news, they noted, “but this remains nan astir apt result by a important margin.”

Break Down of nan 'Trump Trade'?

Some analysts saw nan imaginable for a breakdown of nan “Trump Trade,” which refers to bets connected stocks that would use from nan erstwhile President prevailing successful November and pursuing done connected his promises to curtail authorities regularisation and widen his 2017 taxation cuts, immoderate of which are group to expire successful 2025. 

“The tightening of nan title should spot immoderate unwind of nan caller ‘Republican sweep’ enthusiasm that helped stocks rally successful early/mid July,” wrote analysts astatine Kinsale Trading.

The Risk of a Tighter Race

Analysts astatine Deutsche Bank, meanwhile, reason nan marketplace is much candidate-agnostic than galore believe. A tighter race, they argue, raises uncertainty, creating headwinds for equities. Signs that 1 statement is moving distant pinch nan election, connected nan different hand, trim risk.

“In our reading,” they wrote successful a statement connected Friday arsenic implied likelihood of a Trump triumph slipped amid speculation Biden would retreat from nan race, “the marketplace selloff complete nan past 2 days partially reflects nan humble re-tightening successful nan Presidential race.”

Major banal indexes fell sharply connected Thursday and Friday, led by a selloff successful exertion stocks. A betterment successful tech stocks led nan broader marketplace higher connected Monday.