The situation of the US election is affecting the global market. Last week, Biden performed poorly in the televised debate, and the global market began to be vigilant about his withdrawal. "Trump trade" resurgence.

Currently, the market has begun to rapidly adjust investment portfolios to deal with the risk that Biden may issue a withdrawal statement on July 4th Independence Day holiday or the following weekend.

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.

How likely is Biden to withdraw? Who is the first alternative? Who will nominate Trump's deputy?

JPMorgan analyzed these issues in its latest report on July 3, stating that the next three weeks are crucial. If Biden's support in swing states drops significantly during this period, it may change whether he continues to campaign.

JPMorgan said that if Biden is forced to "resign", current Vice President Kamala Harris (Chinese name He Jinli) will become the Democratic Party's "Plan B". Currently, Harris' betting odds have skyrocketed. She may show more of herself in the campaign before the vice presidential debate held on July 23 or August 13.

Will Biden withdraw? Key swing states.

Biden performed poorly in the first presidential candidate debate and speculation about his withdrawal from the election has been rife.

JPMorgan pointed out that there is currently no sign of Biden withdrawing from the election, and only when the opinion poll results in key swing states in Biden seriously deteriorate, this situation may occur.

• There is currently no sign that Biden has withdrawn from the presidential election, and there is no formal mechanism to remove him from the position of the Democratic Party candidate. Unless he decides to withdraw, there is no formal mechanism to revoke Biden's nomination status.

• At present, Biden's nomination is almost certain. Among the approximately 4,000 delegates who have pledged to support Biden, more than 3,900 delegates still support him. In the first round of voting to ensure the Democratic Party's nomination, the candidate only needs to get a simple majority (ie more than 2,000 votes). There are also reports that in order to eliminate rumors of replacement, the Democratic Party is considering nominating Biden as its presidential candidate early. Ohio requires candidates to get nominations in early August.

JPMorgan pointed out that Biden's nomination may be shaken under the following two conditions, and the third may lead to Biden's withdrawal:

1. Health: First Lady Jill Biden is very committed to her husband's campaign and is unlikely to intervene, but if his health deteriorates, she may persuade him to consider withdrawing.

2. Democratic Party members: If Senate Majority Leader Chuck Schumer or other senior Democratic Party leaders publicly demand his resignation, this will be a strong signal that the Democratic Party hopes to change the candidate.

3. Support rate in swing states: Only when Biden's opinion poll results in key swing states seriously deteriorate to the point where they are seen as inferior in congressional elections, the situation of Biden withdrawing may occur.

The key issue is whether the debate changes the minds of undecided voters in six key swing states (Michigan, Wisconsin, Pennsylvania, Arizona, Georgia, and Nevada) that have not yet decided. JPMorgan said:

If Biden's candidacy would harm Democratic Party votes, Democratic Party leaders may change their support for him, and the next three weeks will be crucial.

If Biden falls behind Trump by 8-10% in key swing states such as Michigan, Wisconsin and Pennsylvania within the next three weeks, he will face tremendous pressure to withdraw. At present, Trump leads in swing states, with a margin ranging from a tie to 5.6%.

More than 90% of voters have made their decisions, and about 10% of voters have not yet made their decisions, which is historically the lowest level. The error range of swing state opinion polls is estimated to be as high as 9%, and it will still be as high as 7% before the nomination. Only in the 1-3 months before the election, the error range of swing state opinion polls will be reduced to 1-3%.

Currently, Biden's campaign team plans to increase proxy spokespersons, including the Clintons, Obamas, first ladies, and Vice President Harris, to increase Biden's support in key swing states and shift voters' focus from Biden's age and debate performance.

If Biden withdraws, who is the first alternative?

Although it is highly unlikely, if Biden does not win a simple majority in the first round of voting, the Democratic Party's "Plan B" is most likely Vice President Kamala Harris. JPMorgan said:

The Democratic Party is likely to choose Kamala Harris, although Harris has a low national approval rating, she has received favorable poll ratings from some key demographics, with 84% support among Democratic voters, 70% support among African-American voters, and higher support among young voters than Biden.

Currently, Kamala Harris' betting odds are soaring, and she may become more prominent in campaign activities prior to the Vice Presidential debates to be held on July 23 or August 13. This will give voters more opportunities to learn about Harris and assess her presidential qualifications, which is becoming more important after Biden's poor performance in the debates.

In addition to Harris, there may be many candidates considering running, including California Governor Gavin Newsom, Michigan Governor Gretchen Whitmer, Illinois Governor JB Pritzker, and Transportation Secretary Pete Buttigieg.

It is worth noting that Democratic Party leaders will do their best to avoid internal divisions, as this will increase the likelihood of Trump's return to the White House. The 1968 Republican National Convention was the most divided convention in American history, with Hubert Humphrey winning the nomination but losing to Nixon in the election.

In addition, some analysts point out that if Biden is re-elected, Harris may also become president at some point in the next four years. If Biden wins the election, there is a 65% chance of him resigning early in his second term, well before the midterm elections, and Harris will become the next president.

'Trump trade' is making a comeback.

As the US election situation changes, Biden's market has begun to adjust its investment portfolio and bet on Trump winning the election, with the return of the "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: There has been a large inflow of funds into the Financial Industry ETF, with the financial industry ETF-SPDR (XLF) recording its highest inflow in more than two months last week, as investors increased their shareholding in banks and showed optimism.

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.

Will Trump's support among Republicans be higher? Who will be nominated for "Vice President"?

As Biden strives to maintain support in swing states, Trump's support among Republicans may further increase, making Trump's "second in command" nomination a recent focus.

JPMorgan believes that the Republican National Convention is likely to be carefully staged to show Trump as the leader of the Republican Party and to win more support from traditional groups within the party. Traditional Republicans will show a conciliatory attitude towards Trump, while black and Latino supporters will occupy prominent positions.

In addition, Trump's vice presidential campaign may announce its selection within 10 days prior to the start of the July 15th convention. Trump has stated that he has selected his "second in command" and they have both participated in debates. Potential vice presidential candidates who participated in the debate include JD Vance (Ohio), Marco Rubio (Florida), Tim Cotton (AK), etc.

Analysis believes that JD Vance is the leading candidate, he is a bestselling author and political rising star who has experienced a 180-degree turn in attitude towards Trump. He once fiercely criticized Trump as a "complete and utter fraud" in 2016 but said Trump was the "greatest president" he had ever encountered during the Republican primaries this year.

Analysis believes that Vance is the representative of the new generation of American conservatives. If he becomes Trump's deputy, he may inject youthful vigor into this "old-fashioned" presidential election, and he will also have an exciting confrontation with current Vice President Harris in the debate arena in the future.

Editor/Emily