Caixin on July 22 (Editor: Huang Junzhi) Under the continuous pressure from all sides to withdraw, US President Biden finally couldn't bear it: early Monday morning Beijing time, he suddenly announced that he would not accept the Democratic Party's nomination and formally withdrew from the 2024 US Presidential Election, and supported the nomination of Vice President Harris as the Democratic Party's presidential candidate.

Therefore, investors now have a new question at the beginning of this week, that is, what impact does Biden's decision have on Trump's chances of winning? Will it increase or decrease? Should they still stick to the 'Trump trade'? Trump himself is extremely confident, and shortly after Biden announced his withdrawal, he publicly stated that Harris is 'easier to beat' than Biden.

Zachary Griffiths, Head of CreditSights US Investment Grade and Macro Strategies, said "The primary impact of this statement should be more uncertainty, which tends to put the market in a risk-off mode - selling off stocks and buying quality names."

Since a disastrous debate prompted concerns and worries about 81-year-old Biden's ability to win the re-election, financial markets have lowered his its chances of success. They generally bullish on a Trump trade that stimulates inflation and interest rates with a combination of loose fiscal policy, higher tariffs, and weakened supervision policy.$Bitcoin (BTC.CC)$The USD gains support, U.S. Treasury yields rise, and bank, medical, energy and consumer stocks all rise.

But now the question facing investors is whether they should persist with the trade since Biden has withdrawn from running for re-election. The market may be volatile, as traders wait to see whether Harris can win the party nomination and weigh whether she can generate enough momentum to challenge Trump's lead in the polls.

Dave Mazza, CEO of Roundhill Financial, said 'Investors should expect large increases in volatility. If Vice President Harris can quickly mobilize and provide substantial challenge to Trump, we should expect volatility to continue. However, if Trump continues his lead in the polls and investors believe his victory is inevitable - a 'Trump trade' would take over and volatility would decrease.'

There is almost no historical data available to interpret how the markets will react to this event. The last sitting president to not seek re-election was Lyndon Johnson in 1968.

Grace Fan, Managing Director of GlobalData Global Policy Research, said the Democratic Party's substitution of candidates means that 'as the market recalibrates the odds, the Trump trade will be volatile,' but she says if Harris ultimately becomes the candidate, these bets are 'unlikely to change significantly'

Bonds and Currencies

If Trump appears more likely to be re-elected president, the general expectation is that the USD will be boosted. The combination of low taxes and high tariffs favored by Trump is seen as a boon to inflation and interest rates, making the USD more attractive. Additionally, because of its safe-haven status, the USD is in higher demand during uncertain periods.

However, in an interview in June, Trump said that a strong US dollar was hurting America's competitiveness, and his campaign partner James Vance has also made this point in the past. After the interview was released, the US dollar against the Renminbi and yen exchange rates fell last week.

'We don't think this is the right trade,' Barclays strategists said in a report on Sunday. 'We believe that a second Trump term would imply further USD strength, and the recent decline provides attractive levels to re-establish our recommended longs (such as USD/CNY).'

The conclusion that Trump would lead to inflation has also seeped into the world's largest bond market, and traders have begun a bet which is to buy shorter-term bonds and sell longer-term bonds, known as the 'steepening trade'.

'As the odds of Harris' victory rise, so does the likelihood of the Democrats taking control of the House,' said Solita Marcelli, Chief Investment Officer for the Americas at UBS Global Wealth Management. 'If that scenario plays out, concerns over additional fiscal stimulus may fade, thereby easing pressure on rates and the US dollar. But it's early days yet, and this election may prove to be vastly different from two weeks ago.'

Over the past week, the spread between US high-yield bonds and European high-yield bonds has also strengthened, and flows into global junk funds have surged, positions that could benefit from a potential Trump victory.

Energy and prison stocks.

The possibility of a Republican victory has boosted some markets, and the anticipated relaxation of Trump's regulations or views on oil and immigration will support these markets.

In June of this year, Trump told Senate Republicans that if elected, he would allow the drilling of oil and gas in the US National Arctic Wildlife Refuge in Alaska, reversing the move by the Biden administration.

Solita Marcelli, Chief Investment Officer for the Americas at UBS Global Wealth Management, wrote in a report last month that a Trump victory could influence the renewable energy and non-essential consumer industries if the Republican-controlled Congress 'plays its hand.'

Due to Trump's tough stance on immigration,$The GEO Group Inc (GEO.US)$And.$CoreCivic, Inc. (CXW.US)$and other private prison stocks have been rising.

Health insurance companies and bitcoin miners.

Some industries that are believed to benefit from the regulatory pressure that the Trump administration may ease are health insurance companies, such as$UnitedHealth (UNH.US)$,$Humana (HUM.US)$banks.

RBC Capital Markets analyst Ben Hendrix said last month that Trump's second term would ease regulatory and reimbursement obstacles that have weighed on managed care stocks.

In the financial sector, Trump has shown favor towards bitcoin miners. In June, the former president met with executives in the industry, stating his liking for cryptocurrencies and will advocate for the miners. $CleanSpark (CLSK.US)$And.$Riot Platforms (RIOT.US)$Stocks of bitcoin miners, such as,

Cannabis and renewable energy.

Industries that responded to the prospect of a Democratic victory during Biden's campaign included cannabis and renewable energy stocks, which may still be the case now that he has dropped out.

In May of this year, the U.S. Department of Justice launched a process to reclassify marijuana as a substance with lower levels of danger, which immediately impact the industry. Since then, this trend has gradually subsided,$Advisorshares Trust Pure Us Cannabis Etf (MSOS.US)$has fallen by about 10% since Biden's disastrous defeat in the debate at the end of June.

The Biden administration's support for electrification and blue and green hydrogen production has been a boon for clean energy stocks. An analysis by Bloomberg Intelligence shows that a Trump victory in November's election would threaten the US clean energy plan's milestone $369 billion American Clean Energy program.

Editor/Somer