Biden's exit is making US markets 'uncertain' and in turn, volatile

According to experts, though the announcement that the 81-year-old Biden may withdraw from the presidential elections was expected, it is still causing a lot of " uncertainty" in the market.

Moreover, besides this shock, for investors, the week will also be packed with critical US and European company earnings, with Tesla, Microsoft, and LVMH reporting their second-quarter results. While futures markets point to a higher open on Wall Street after Biden's exit, reports said that "volatility may lie ahead".

According to a Bloomberg report, who quoted financial experts, said that there was “a lot of confidence about Trump winning, and markets won’t like this new uncertainty, along with the news cycle about who is in, who is out, and all those unknowns”.

Betting on Trump trade

In a post on X, US President Joe Biden declared that he had dropped out of the presidential race, and endorsed Harris as the Democratic nominee. As investors absorbed this information, they are not quite sure if betting on sectors and strategies considered to gain from the Republican party pushing looser fiscal policy, higher trade tariffs and weaker regulations, are as solid now.

How will this new uncertainty shape the bond market is what investors are worrying about. Investors had believed that Trump was going to win and were banking on Trump trade. Now traders have to wait to see if Harris gets nominated as the Democratic Presidential candidate and whether she is able to challenge Trump’s lead in the polls and how that will reflect on the markets.

Markets seem on edge as traders wait to see if Harris secures her party’s nomination and challenges Trump’s lead in the polls. As Trump is expected to win the Presidential elections, there have been gains in bank, health and energy stocks as well as in Bitcoin.

Meanwhile, the US dollar weakened against most other major currencies in the Asian session on Monday (July 22), with the euro, Swiss franc and Mexican peso seeing marginal gains.

Experts said that markets should focus on the Fed's policy rather than on political events as the presidential outcome becomes more uncertain. The Fed is about toon the cusp of lowering interest rates for the first time since the pandemic in 2020. 

Further, experts felt that if Kamala Harris manages to put up a good fight against Trump and mobilises support, the volatility in the markets is expected to linger. But if Trump manages to stay ahead in the race, the volatility will decline.