Sweeping changes unfolded in global markets after President Joe Biden decided to drop out of the 2024 presidential election on Sunday and endorsed Vice President Kamala Harris as the Democratic nominee. European stocks experienced an uptick, while premarket trading in the US indicated higher numbers following Biden’s announcement. Dow futures rose by 40 points, S&P 500 futures were up by 0.5%, and Nasdaq futures increased by 0.8%. European markets saw gains, although Asian markets closed mostly lower. US Treasuries rose slightly, lowering yields, and the dollar softened against major currencies.
Concerns about Biden’s ability to defeat former President Donald Trump led Wall Street to anticipate a Trump victory in November. This led to “Trump trades,” where investors bought stocks they believed would benefit under Trump’s tariff-heavy agenda, while selling off stocks related to industries that could be hurt by Trump’s policies, such as green energy. Trump’s policies were also predicted to worsen America’s inflation problem and increase the US deficit. Trump’s apparent advancement in recent weeks caused US Treasury prices to fall and yields to rise, indicating anticipated higher inflation.
With the Democratic party now appearing to support Kamala Harris as the probable nominee, some of the Trump trades may begin to unwind or be put on hold until new polling data indicates Harris’s potential to defeat Trump. With less than 100 days until the US election in November, Biden’s departure and endorsement of Harris could have led to concerns among uncertain investors. However, Infrastructure Capital Advisors CEO Jay Hatfield believes that Biden’s endorsement of Harris reduces uncertainty and expects a modest market reaction. There may be a slight unwinding of the Trump trades on Monday as Vice President Harris is perceived to have a slightly better chance of winning.
Despite the recent upheaval in the markets, uncertainty remains as the US presidential election approaches. Last week was particularly rough for markets, with the S&P 500 experiencing its worst three-day performance of 2024 and Europe’s STOXX 600 recording its worst weekly performance since October. Analysts are concerned that market volatility may continue as the election draws near. Deutsche Bank’s Henry noted heightened uncertainty about the election outcome, especially since President Biden’s withdrawal was unprecedented since Lyndon Johnson in 1968. Additionally, September has historically been a weak month for the S&P 500, declining every year since 2020.
Although markets have been unstable due to the turbulent election cycle and a global tech outage that affected technology stocks, they remain strong. The S&P 500 has been higher for 28 out of the last 38 weeks, a trend not seen since 1989. However, the current focus on the US presidential election could lead to continued market volatility. With uncertainty surrounding the candidacy changes and the potential impact on various industries, investors are navigating through a complex market landscape. Despite the challenges, the market remains resilient, demonstrating a level of strength and adaptability amid ongoing political and economic shifts.
