By D. Maan, Jadetimes News
Global Markets Rally After Biden Exits 2024 Presidential Race
Global markets saw significant gains after President Joe Biden announced his withdrawal from the 2024 presidential election on Sunday and endorsed Vice President Kamala Harris as the Democratic nominee.
European stocks experienced an uptick, and morning trading in the US showed positive movement following Biden’s announcement. The Dow Jones Industrial Average rose 123.7 points, or 0.3%. The S&P 500 increased by 0.7%, and the Nasdaq Composite climbed 1.1%. While European markets also rose, Asian markets closed mostly lower. Early Monday, US Treasuries saw a slight increase, which trimmed yields, and the dollar softened against major currencies.
The Impact on Trump Related Trades
Biden's departure from the race had a notable effect on what were termed "Trump trades." These trades emerged from significant doubts about Biden’s ability to defeat former President Donald Trump, prompting Wall Street to begin pricing in a Trump victory in November. Investors bought stocks they believed would benefit from Trump’s tariff heavy agenda and sold off stocks related to green energy and other industries potentially disadvantaged by Trump’s policies. Many economists have predicted that Trump’s policies could exacerbate America’s inflation issues and increase the US deficit. As Trump’s chances seemed to improve in recent weeks, US Treasury prices fell, and yields rose, anticipating higher inflation.
With the Democratic Party now appearing to rally around Vice President Kamala Harris as its likely nominee, some of the Trump trades could begin to unwind or at least pause until new polling provides clarity on Harris's chances against Trump.
Market Reactions and Future Uncertainty
Jay Hatfield, CEO at Infrastructure Capital Advisors, remarked that Biden's endorsement of Harris reduces uncertainty. “There may be a small unwinding of the Trump trade on Monday as Vice President Harris is perceived to have a slightly better chance of winning,” he added.
Last week was particularly challenging for markets, with the S&P 500 experiencing its worst three-day performance of 2024 and Europe’s STOXX 600 logging its worst weekly performance since October, according to Deutsche Bank data. Analysts are concerned that market volatility could persist as the election approaches.
Henry Allen from Deutsche Bank noted in a research report that markets are increasingly focused on the upcoming US presidential election, with heightened uncertainty following Biden's unprecedented withdrawal as an incumbent president since Lyndon Johnson in 1968. The S&P 500 has seen declines in every September since 2020, marking it as the worst month for the index over the past three years.
Despite recent turbulence, markets have remained unusually strong. The S&P 500 has been higher for 28 of the last 38 weeks, a trend not seen since 1989.
Last week's market turmoil was compounded by a turbulent election cycle and a global tech outage that particularly impacted technology stocks. As the election draws nearer, market participants will continue to navigate the uncertainty and potential volatility.
