After last week's debate with Trump, Biden had a poor performance and expectations of 'Biden dropping out' have risen sharply. This wave is causing a rapid adjustment in the global investment landscape and a resurgence of the 'Trump trade'.

With the sudden changes in the situation of the US election, speculation that Biden will drop out of the race is on the rise. According to a Wednesday report by the Global Times, CNN revealed that some high-ranking members of the Democratic Party 'hope Biden can withdraw from the election this week'. The betting market thinks there is less than a 50% chance he will continue running.

It is expected that Biden may issue a withdrawal statement on July 4th Independence Day holiday or the following weekend.

The global financial markets are rapidly adjusting to respond to potential political risks. The market reacted after the first debate, with the US dollar rising significantly and the bond market reacting most violently, with the benchmark 10-year Treasury yield rising as much as 20 basis points in the following days.

The market generally believes that if Trump is re-elected, it will push a series of 'Trump trades' that benefit from inflationary fiscal policies and protectionism. This includes a stronger US dollar, higher US bond yields, and rising bank, medical care, and energy stocks.

The global market is wary of Biden's withdrawal.

Biden's poor performance during his debate with Trump last week was widely considered a disaster and caused questioning as to whether he is suitable for another term as president.

According to a report by Global Times, CNN revealed that some high-ranking members of the Democratic Party 'hope that Biden can withdraw from the election this week'. Biden told allies that he is weighing whether to continue running, but White House deputy spokesman denied it.

With the changes in the US election situation, the global financial markets are highly vigilant. Gennadiy Goldberg, head of US interest rate strategy in New York at TD Securities, pointed out that the market has been re-evaluating the probability of the election since the debate and that the news over the past 24 hours has only added fuel to the fire.

A Wall Street fund manager said he is inclined to hold US dollars and short-term bonds to hedge against potential risks rising. This cautious attitude is spreading throughout Wall Street, as investors prepare for various possible situations, including Biden dropping out, Trump winning, and even more uncertain political situations.

'Trump trade' is making a comeback.

The market has begun adjusting investment portfolios, betting on Trump's victory and the resurgence of 'Trump trade'. Specifically:

USD: Rose in the few hours after the debate, reflecting the market's expectation of Trump's possible victory. Trump promised to impose more tariffs and take a tougher stance on immigration, which could lead to inflation and a stronger dollar.

US bonds: Investors buy short-term bonds and sell long-term bonds, betting on a steeper yield curve. In the two days since it began last week, the 10-year Treasury yield relative to the 2-year yield has risen by about 13 basis points, the largest steepening since October last year.

US stocks: Medical insurance companies, banks, and energy stocks are favored by investors, as these industries are expected to benefit from relaxed regulation and pro-business policies.

Financial industry ETF: Large inflows of funds have been seen in this area, with the $SPDR Financial Industry ETF (XLF.US) breaking the record for the highest net inflow in over two months last week, with investors increasing their holdings by about $540 million, reflecting optimism towards bank stocks.$Financial Select Sector SPDR Fund (XLF.US)$Last week, there was an inflow of funds that reached the highest record in over two months. Investors increased their shareholding by about $540 million, reflecting optimism towards banks' stocks.

Cryptocurrency: The crypto market is also receiving attention. Trump's supportive stance on the crypto industry could benefit cryptocurrencies such as Bitcoin and Solana. Some analysts believe that the crazier the US political system looks, the more attractive Bitcoin looks.

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