Global markets experienced gains following President Joe Biden’s decision to withdraw from the 2024 presidential race and endorsed Vice President Kamala Harris as the Democratic nominee. European stocks saw an uptick, and US markets also moved higher in morning trading. The Dow Jones Industrial Average increased by 123.7 points, or 0.3%, the S&P 500 rose by 0.7%, and the Nasdaq climbed by 1.1%. In contrast, Asian markets mostly closed lower, while US Treasuries saw a slight rise, reducing yields, and the dollar weakened against major currencies.
Biden’s exit from the race had significant implications for market expectations. Before his announcement, investors were pricing in a possible Trump victory, leading to a rise in so-called “Trump trades.” These trades involved buying stocks expected to benefit from Trump’s tariff policies and selling stocks related to green energy, which could be negatively impacted by his administration. As Trump’s prospects appeared to improve, US Treasury prices fell, and yields increased, reflecting concerns about higher inflation and a ballooning deficit under a Trump presidency.
With Biden now endorsing Harris, some of these Trump-focused trades may start to unwind, as investors reassess Harris’s chances against Trump. Jay Hatfield, CEO at Infrastructure Capital Advisors, suggested that the market reaction might be muted, with a small reversal of Trump trades expected as Harris is seen as having a slightly better chance of winning.
Despite these recent developments, markets remain unusually strong overall. The S&P 500 has been up in 28 of the last 38 weeks, a performance not seen since 1989. However, last week was particularly rough, with the S&P 500 experiencing its worst three-day performance of 2024 and European markets logging their worst weekly performance since October.
Analysts are cautious, noting that market uncertainty might persist as the election approaches. Henry Allen of Deutsche Bank highlighted the heightened uncertainty following Biden’s withdrawal, especially considering that the S&P 500 has historically struggled in September. Nevertheless, the overall strength of the markets provides a hopeful sign amid the turbulence.
Source: CNN
