Source: Wall Street See
Traders are working hard to cope with the uncertainty of the Federal Reserve's interest rates and the upcoming performance of technology giants, and now they must further weigh how Harris or other candidates will counter Trump. With only four months left until the election, there are too many unknowns, and the US stock market may face a "turbulent summer".
As the US stock earnings season gets underway, Biden's sudden announcement to withdraw from reelection campaign has drastically changed the US presidential election landscape, adding new uncertainties to the financial market.
According to CCTV News on Monday, current President Biden announced his withdrawal from the 2024 presidential election and recommended Vice President Harris as the Democratic candidate to compete with Trump.
Currently, traders are working to cope with the uncertainty of Fed interest rates, upcoming earnings reports from tech giants, and now they must further weigh how Harris or other candidates will compete against Trump. With four months until the election, there are too many unknowns and traders are preparing for a "Summer of Turbulence".
This decision has completely disrupted the original expected election outlook, and investors are weighing the potential impact of this change on the market. Some analysis believes that the "Trump trade" will begin to unwind and predicts good performance for emerging market assets.
The market is currently reacting calmly.
The Asian market opened calmly, with S&P 500 futures up nearly 0.4%, and the "key political indicator" Bitcoin slightly down. The US dollar exchange rate remained basically stable.
Overall, the market's immediate reaction to this political upheaval was relatively calm. However, after performing poorly in the first television debate, the market expected Biden to drop out of the race. Then Biden consecutively tested positive for COVID-19, faced dissuasion from party insiders and donors, and his election prospects appeared to plummet.
This political turmoil began just on the eve of the earnings release for Alphabet and Tesla, amongst other large technology stocks.
Last week, the S&P 500 fell by 2%, as investors increased their bets that tech stocks will lose their dominance, and smaller companies benefitted. The Russell 2000 index rose for a second straight week, while the rotation between tech and small-cap stocks continues.
However, some industries are more sensitive to political changes. As trading resumes on Monday, investors worried about political influence may focus on cryptocurrencies, private prison operators, fossil fuel-related companies, as well as heavily regulated industries such as finance and healthcare, and gun manufacturers.
The US stock market is now facing a "Summer of Turbulence".
Biden's withdrawal from the race has brought about significant changes in the US political landscape, adding new uncertainties to the financial market. Investors are closely monitoring the development of the political situation to evaluate the potential impact of different candidates' policy positions on the market. In the next few months, the market may experience significant volatility due to political factors.
Gene Munster, co-founder of Deepwater Asset Management, said:
This means there will be more uncertainty in the short term. The market had great confidence in Trump's victory before, but now there are new unknown factors. The market doesn't like this uncertainty, as well as news about who will be elected and who will be ousted, and all these unknowns.
Dan Suzuki, Deputy Chief Investment Officer at Richard Bernstein, said:
His announcement has added uncertainty to the Republican sweep of the market, and everything is still unknown until the Democratic candidate is more certain.
Matt Maley, a strategist at Miller Tabak, believes that:
The "Trump trade", Bitcoin, and energy will begin to unwind, and some affected trades such as solar energy stocks or electric cars may rebound. But there are still many uncertainties now. The market doesn't like this. From now until September, we will see a significant increase in volatility.
Jack McIntyre, global investment manager at Brandywine, said:
For risk assets including emerging markets, the initial response will be positive. If everything goes well, the Democratic Party can now take control of the House of Representatives, and the market generally hopes to see more of these results rather than a Republican sweep.
Jennifer Gorgoll, Investment Manager at Neuberger Berman LLC, believes that:
In the short term, the expectation of a rate cut by the Federal Reserve will dominate the market, potentially weakening the US dollar and leading to strength in CSI commodity equity index and mmf.
In addition to the broader risk appetite associated with the 'Trump trade,' the market may see stunning growth in 2025, and we believe that emerging markets may be the primary beneficiaries.
Editor / jayden