The recent decision by US President Joe Biden to withdraw from the 2024 presidential race and endorse Vice President Kamala Harris as the Democratic Party’s nominee is expected to have a significant impact on the financial markets. This move comes one week after an assassination attempt on former President Donald Trump, adding to the uncertainty already present in the markets. Investors are becoming more cautious about the potential market response to recent political events, as well as the expected rate cuts by the Federal Reserve in September. While futures markets are pointing to a higher open on Wall Street following Biden’s exit, volatility may lie ahead.
The US dollar has weakened against most major currencies following Biden’s announcement, with the euro ticking up in the Asian session on Monday. This weakening of the US dollar is attributed to growing odds that Donald Trump may win the election. Cryptocurrencies have also seen a surge in prices since the assassination attempt on Trump, with Bitcoin jumping more than 18% after the incident and an additional 5% following Biden’s withdrawal from the presidential race. The market is reacting to the potential victory of a crypto-friendly candidate who has accepted private fundraising in cryptocurrencies.
Stock markets are also expected to open higher in both Wall Street and European markets following the weekend’s events. While the market rebound may be driven by dip-buying after a recent sharp retreat, Vice President Harris’s nomination could offer hope of gathering more support against Trump, who has seen a rise in opinion polls after the assassination attempt. Historically, Wall Street has experienced more bullish trends under Democratic governments, though the market’s reactions are not always predictable. In the short term, market focus is likely to be on the Federal Reserve’s policy decisions as the presidential outcome becomes more uncertain.
In terms of sectors, fossil fuel providers and banking stocks may benefit from a Trump-led government, as regulations could potentially be loosened. Healthcare and consumer stocks might also see positive outcomes, while renewable energy companies and electric vehicle makers may face challenges due to potential anti-climate change policies under Trump. European counterparts to these sectors could also experience ripple effects. However, these potential trends are still subject to change as the election is months away.
Commodities prices, such as metals and energy, were volatile in the Asian session on Monday due to fluctuations in the US dollar. While prices initially increased for commodities like gold, silver, copper, crude oil, and natural gas, there are concerns about a renewed trade war between the US and China which could impact commodity prices further. The ongoing uncertainty in the markets makes it difficult to predict the direction of commodities in the near future.
