How Biden’s decision to drop out of the US election race has affected the economy

This article was originally published in English

A week after the assassination attempt on Donald Trump, US President Joe Biden has decided to withdraw from the 2024 presidential race and endorse the Vice President Kamala Harris as a candidate for the Democratic Party.

Investors have become more cautious in the face of the market response to the recent political events, to which is added the widely expected rate cut by the Federal Reserve in September. Uncertainty is growing and may lead to new risk aversion actions in the markets.

The week will also be full of important results of American and European companies, with Tesla, Microsoft and LVMH presenting their second quarter results. Although futures markets point to a higher opening on Wall Street following Biden’s departure, volatility is likely to loom.

What impact has Joe Biden’s withdrawal from the presidential race had on the economy?

The potential impact of the US elections on the market is highly unpredictable, depending on how they develop. the results of the surveys in the coming months. The 2024 US presidential election will take place on November 5.

He American dollar weakened against most major currencies in the Asian session on Monday, which boosted the eurowhose exchange rate rebounded to close to 1.09 after two days of declines.

The weakness of the dollar The US economy is associated with the increasing likelihood of Donald Trump winning the election. This reflects the market reaction the last time Trump ran for president in 2016, as investors anticipated the Fed would cut interest rates amid political uncertainties.

However, the US dollar strengthened significantly after the election, as the market usually responds in advance to the actual event.

In particular, cryptocurrencies have seen a strong bullish momentum since the assassination attempt on former President Trump last week. The incident has strengthened the chances of the president’s victory. crypto-friendly candidatewho accepted the fundraising private cryptocurrency.

Bitcoin is up more than 18% to over $68,300 since the assassination attempt, after it jumped about 5% following Biden’s announcement to drop out of the presidential race on Sunday.

Stock markets could open higher

Stock futures point to a higher opening on Wall Street as well as in European markets. There is no clear indication of how equities will react to the weekend’s events, as the market rebound may have been driven by the buy low following the recent sharp market pullback.

However, Harris’ nomination may offer some hope that she can rally more support against Trump, who has experienced a rise in opinion polls since the attack. Historically, Wall Street has seen more uptrends under a Democratic administration than under a Republican one, although history does not necessarily repeat itself.

The US economic outlook is uncertain

In the short term, markets should focus on Federal Reserve policy rather than on the political eventsas the presidential outcome becomes increasingly uncertain. The Fed is on the verge of lower interest rates for the first time since the pandemic hit in 2020. The U.S. economic outlook is increasingly uncertain given recent data and the political climate.

As for the sectors, the fuel suppliers Fossil companies such as Baker Hughes, Exxon Mobil and Occidental Petroleum could benefit. Their European counterparts, such as BP and Shell, are also likely to follow this global trend.

Bank values could also be boosted by the possible relaxation of regulations under a Trump-led administration, particularly those most exposed to investment banking, such as Goldman Sachs and Morgan Stanley.

The healthcare sector could see a positive outlook

In addition, the healthcare sector could see a positive outlook in light of possible political support for private health insurance. Consumer stocks could also benefit from his proposed tax cuts.

On the contrary, companies renewable energy and electric vehicle manufacturers could be negatively affected by the climate change policies that Trump could implement. Among the stocks that could be affected are electric vehicle manufacturers such as Tesla, Rivian and Lucid.

European renewable energy companies such as Iberdrola, National Grid and TotalEnergies could also experience domino effectsHowever, the November elections are still months away, so it is not possible to determine these possible trends.

Raw materials fluctuate

Commodity prices such as metals and energy were volatile due to the fluctuation of the US dollar in the Asian session on Monday. Prices of gold, silver, copper, crude oil and natural gas initially rose before cutting profitsas investors looked for clues about the market’s reaction to the dollar.

Despite the signs of recoveryIt is too early to say that the downtrend is over, as the possible resumption of the US-China trade war may put pressure on commodity prices.