Finance
How investors are reacting to Biden’s departure
(Bloomberg) — Markets already had plenty to deal with as summer is in full swing, from assessing the Federal Reserve’s rate-cutting path to the heart of earnings season. But the 2024 presidential race continues to make headlines.
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A week after an assassination attempt on Republican Donald Trump rattled investors, President Joe Biden said Sunday he will not seek re-election and endorsed Vice President Kamala Harris as the Democratic nominee.
With Biden’s historic move coming less than four months after the November election, the political chaos threatens to fuel unrest on Wall Street, at least in the short term, market observers said. And the so-called Trump Trade recommendation — good for energy companies, banks and Bitcoin, but bad for electric vehicles and renewables — could start to fray, having gained momentum following Biden’s disastrous presidential debate.
Here are some initial comments from investors:
Wayne Kaufman, chief market analyst at Phoenix Financial Services
I wish we had less history. Last week my team discussed the market implications of an assassination attempt. The question is whether the buy the dip people will come back amid all this uncertainty. Valuations have been an issue, AI optimism has done a lot to keep the market buoyant, and we are entering August and September which have historically been weak months. But overall this was a historic market.
Julie Biel, portfolio manager and chief market strategist at Kayne Anderson Rudnick
There is more uncertainty now. For a situation with a candidate who has not completed the normal primary process, we simply do not have that much priority. So once again we continue our very long love affair in unprecedented times. And while we may feel like we’re used to everything but business as usual, this is still a big spoonful of uncertainty to swallow.
Matt Maley, chief market strategist at Miller Tabak + Co.
Trump trades such as Bitcoin, energy will start to relax and some trades that have been affected, such as solar stocks or EVs, may bounce back. But there is still a lot of uncertainty and the markets don’t like that. And we’ll see a big spike in volatility between now and Labor Day and through September.
Yung-Yu Ma, Chief Investment Officer at BMO Wealth Management
The Trump trade will likely take a breather until it becomes clear who the Democratic nominee will be. Broadly speaking, this event injects even more political uncertainty into the markets, which is likely to result in some turmoil in the short term.
The news also roiled currency and bond markets, with money managers in emerging markets expecting some of the early ‘Trump trades’ – including dumping some currencies in Asia and Latin America and buying bonds from El Salvador – will be settled, which will be a short-term boon. risk assets.
Concerns about a strong dollar under the new Trump administration, plus tariffs and a potential Republican landslide victory are starting to weigh on emerging market assets, which continue to falter amid the Fed’s uncertain timeline to cut rates.
Jack McIntyre, portfolio manager at Brandywine Global Investment Management.
The initial reaction will be positive for risky assets, including emerging markets. If all goes well, Democrats can now take the House. The markets generally want to see more of that, as opposed to action from Republicans.
Jennifer Gorgoll, portfolio manager at Neuberger Berman LLC
In the short term, the potential for Fed rate cuts will dominate markets, potentially weakening the dollar and leading to stronger commodities and emerging currencies. This, combined with broader risk of bias related to the Trump trade, sets markets up for a spectacular 2025, and we think emerging markets could benefit significantly.
Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities said:
It is not entirely clear what this means for the rates market. This could lead to even more stalemate in the bond market. Don’t think there’s a big trading in interest rates here, because we don’t really know how fiscal policy will play out. The US Treasury market will continue to focus on supply, balance sheets and economic data. We could get some choppy price action, but Fed prices should remain focused on what is already moving.
Barry Knapp, managing partner at Ironsides Partners
Ultimately, the uncertainty has become a lot greater. What does this mean for how futures will open? That’s not clear. Bitcoin moved a little. But we also just had a messy week, which I don’t think has much to do with Trump. I think this has more to do with the weakening of the economy, and the Fed’s hesitant move toward a 50 basis point rate cut in September. Ultimately, there’s a lot going on, and this is more uncertainty.
Dan Suzuki, Deputy Chief Investment Officer at Richard Bernstein Advisors
The immediate impact is to add uncertainty to the Republican narrative gripping the markets. Other than that, it’s all up in the air until we have more clarity on who the Democratic nominee will be.
Art Hogan, chief market strategist at B. Riley Wealth
President Biden’s exit from the race was already starting to be priced into the market. The Trump trade, if there is one, is indistinguishable from small caps being rotated because of the potential for lower interest rates. The Fed is likely to make cuts in September. The only thing that stands out in the current Trump trade seems to be a small bump in Bitcoin and the rest of the cryptocurrencies as he is seen as more favorable for that asset class.
–With help from Julia Leite, Michael Mackenzie, Liz Capo McCormick, and Carolina Wilson.
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