A letter from U.S. President Joe Biden announcing his withdrawal from the race is displayed on a mobile phone screen in front of a computer screen showing photos of President Biden and U.S. Vice President Kamala Harris, on July 21, 2024 in Ankara, Turkey.
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The “Trump Trade” could turn things around after President Joe Biden dropped out of the 2024 presidential race, switching his support to Vice President Kamala Harris.
Biden’s alarming debate performance and assassination of former President Donald Trump has prompted markets to price in another term for the Republican candidate.
The Trump trade refers to stocks expected to benefit if the former president returns to the White House.
CNBC previously reported that Wall Street saw a Trump’s victory is good for stocks as the Republican candidate has called for lower taxes and deregulation. Conversely, traders expect green energy stocks to be hit by Trump’s proposed tariff hikes, which some economists say could lead to higher inflation.
Asian markets mostly lower Monday morning was the first area to resume normal trading following Biden’s announcement.
Michael Brown, senior research strategist at Australia-based brokerage Pepperstone, told CNBC the withdrawal was largely expected, given mounting pressure from Democrats and a “disastrous debate performance.”
Brown said he expects volatility across asset classes as uncertainty has been introduced into the election, with the race for the White House now significantly more open. The strategist expects the US dollar to weaken as some of the “Trump business” is resolved, adding that he believes the prospects of a Democratic victory have increased slightly.
He also expects stocks to fall in the short term, but noted that any dips should be viewed as a medium-term buying opportunity as the Federal Reserve is still expected to cut interest rates and both economic and earnings growth remain solid. The U.S. is scheduled to report personal consumption expenditures — the Fed’s preferred inflation gauge — for the second quarter on Thursday.
David Roche, president of Quantum Strategy, said in a note Monday morning that Harris is likely to be endorsed by Democrats, pointing out that “changing Harris at this point would cause even more chaos and would raise many existing funding issues for the Biden-Harris ticket.”
However, Roche said nominating Harris would increase Trump’s chances of winning, but decrease the chances of Republicans winning both houses of Congress.
A whole new race
In contrast, Charles Myers, founder and CEO of the consulting firm Signum Global Policy, has a different view on the possibility of nominating Harris.
Speaking to CNBC “Squawk Box Asia“Myers said Harris’ emergence as the frontrunner for the Democratic nomination has turned this into “a whole new race.”
“There’s a new candidate with tremendous unity and enthusiasm behind her. She’s going to be a major motivator for women, young people, black voters… I think people are going to underestimate her,” he added.
Harris made history as the first woman and first black person to become vice president. If she wins the Democratic nomination, she will become the second woman to run for president, after Hillary Clinton in 2016.
“I think it’s too early for the market to declare Trump a winner, and I think she’s going to have to fight him hard,” Myers said.
Like Pepperstone’s Brown, Myers added that the “Trump deal” is at risk, at least in the short term.
By the time the Democratic National Convention begins on August 19, Myers said Harris will pick a running mate, predicting that she will “win the nomination with tremendous momentum,” helping the vice president surge ahead of Trump in the polls.
“Some of the names and other assets tied to a Trump victory have done quite well, but also on the sidelines and given the race has just fallen into complete chaos… I would be very cautious and cautious in assuming that Trump will easily win.”
