Markets are bracing for uncertainty as pressure grows for President Joe Biden to step down as the Democratic nominee for November’s presidential election. Republican front-runner Donald Trump’s chances of victory have risen since his rivals’ shaky performances in last week’s debate, with implications for bonds, stocks and the broader economy.
Market reactions to the debate show that a Trump victory could have very real implications. Bond yields rose in response to the likelihood of a Trump victory. Investors were banking on Trump’s promise…
Markets are bracing for uncertainty as pressure grows for President Joe Biden to step down as the Democratic nominee for November’s presidential election. Republican front-runner Donald Trump’s chances of victory have risen since his rivals’ shaky performances in last week’s debate, with implications for bonds, stocks and the broader economy.
Market reaction to the debate shows that a Trump victory could have very real implications: Bond yields have risen in proportion to his chances of victory, as investors bet that his promised tax cuts will increase government borrowing and that his plans for high tariffs on imports will spark inflation.
The impact on stock prices will vary by sector. Companies that would benefit from lighter regulation and tariffs, such as banking and steel, will benefit. Clean energy companies could face tougher conditions.
The deciding factor in whether Biden stays in the race could be the polls. A new Wall Street Journal poll showed Trump’s lead widening to 6 percentage points, its largest since 2021. And if Biden pulls out, it’s unclear how markets will react. Who replaces Biden is less important. Possible candidates range from Vice President Kamala Harris to former first lady Michelle Obama.
The safest way to bet on the possibility of a Democratic nominee change is probably to not bet on it. Try to keep your bets separate from predictions about who will become president. There are huge possibilities for upsets between now and November, and no one can say for sure what will happen.
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Contact Brian Swint at brian.swint@barrons.com.
