Wall Street "Biden Resignation Prerecorded"... Caution Over Increased Volatility

Trump Beneficiary Stocks and Bitcoin Rally Over Past Two Weeks
Limited Impact on Market Expected
However, Increased Uncertainty May Lead to Greater Volatility

As President Joe Biden abruptly withdrew from the presidential race, Wall Street has expressed mixed views on the potential impact on the market. While the consensus is that the market has already priced in a 'Trump dominance' scenario, limiting the effect of Biden's withdrawal, there are also concerns about increased volatility.

According to Bloomberg and other sources on the 21st (local time), investment-focused media Barron's described Biden's announcement to withdraw from the candidacy as "not exactly a surprise," explaining that the market had already reflected the 'Trump trade' phenomenon following Biden's disappointing debate performance and the assassination attempt on former President Trump.

[Image source=AFP Yonhap News]

As Barron's pointed out, the market had been anticipating a possible victory for former President Trump. TMTG, the parent company of Truth Social, considered a representative 'Trump beneficiary stock,' surged 31.37% on the first trading day after the assassination attempt on Trump on the 15th. Bitcoin, regarded as a pro-Trump asset, also surpassed the $60,000 mark immediately after the attack and had recovered to around $68,000 as of 6:45 PM Eastern Time. Following the presidential debate, concerns about a resurgence of inflation due to Trump's protectionist stance and tax and tariff policies caused the Treasury yields to spike for three consecutive trading days, a phenomenon dubbed the 'Trump tantrum.'

David Wagner, portfolio manager at Aptus Capital Advisors, said, "While the 'Trump trade' trend that dominated the market over the past two weeks may slightly reverse, allowing small-cap stocks to rise, Trump beneficiary stocks are unlikely to give back all their gains." He added, "The biggest influence on the market will be the Democratic Party's policies and regulatory stance, so who becomes the Democratic presidential candidate will be the most significant event." President Biden has expressed support for Vice President Kamala Harris as the next Democratic presidential candidate.

Isaac Boltansky, head of policy research at investment bank BTIG, told MarketWatch, "Even if Vice President Harris becomes president, she would represent a continuation of the Biden administration." He emphasized, "Concerns about Biden completing the presidential race were related to his health and capability, not his policies." He assessed that even if the Democrats produce a president in the November election, overturning the Trump dominance theory, the market is unlikely to experience major changes.

However, some believe that increased election uncertainty could lead to greater market volatility. Gina Bolvin, CEO of Bolvin Wealth Management Group, told Barron's, "Biden's withdrawal from the candidacy introduces a completely new level of political uncertainty," adding, "This could act as a catalyst for excessive market volatility."

Matt Maley, chief market strategist at Miller Tabak, analyzed, "Trump trade-related assets like Bitcoin and energy may undergo corrections, while stocks that were hit, such as solar and electric vehicles, could see some rebounds." He predicted, "We will see significant volatility spikes from now until Labor Day in September." The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's 'fear gauge,' reached 16.52 on the 19th, the highest level in three months since April 23.