President Biden announced Sunday that he will not seek re-election in November, adding to uncertainty about who will fill the White House in 2025.
The stock market appeared to shrug off worries about the election, with the S&P 500 rising more than 1% on Monday. Investors also gained clarity on the Democratic nominee situation, as Biden and several prominent Democrats, including Speaker Emeritus Nancy Pelosi, endorsed Vice President Kamala Harris as their nominee.
The news delivered “another curveball” to investors trying to understand how political news will affect the stock market in 2024, Lori Calvasina, head of global equity strategy research at RBC Capital Markets, wrote in a client note Monday.
The recent rise in stocks has been driven in large part by investor confidence in who will be the next president. As betting markets increased the odds that former President Donald Trump would win the November election, stocks rose, too. When Trump’s odds peaked around July 16, the S&P 500 hit its most recent high.
“If a change in the top candidates tilts the race for the White House back in Democrats’ favor, it could fuel a short-term retreat that may already be underway, given historical relationships,” Calvasina wrote.
“If Trump extends his lead, historical data suggests stocks may be able to avoid the decline we feared. But it’s also possible that this relationship won’t hold.”
Dave Mazza, CEO of Round Hill Investments, echoed that sentiment in an interview with Yahoo Finance on Monday, saying investors should prepare for “further volatility” if a new Democratic candidate moves markets toward predicting a closer presidential race.
Mazza added that markets could be “turbulent” overall over the coming week, as earnings reports from major technology companies and data on economic growth and inflation come alongside ongoing political turmoil.
“The biggest news story in the short term will be the outcome of the presidential election,” Mazza said. “After that, investors will start looking to absorb corporate earnings and will start looking to the Fed again.”
“I think it’s definitely going to be a little volatile,” Mazza said, “but ultimately earnings are going to be the long-term driver even though there’s a lot of macroeconomic news in the short term.”
President Joe Biden speaks during a news conference in Washington on July 11. (AP Photo/Jacqueline Martin, File) (The Associated Press)
As for how investors should begin thinking about a potential Trump-Harris showdown, Wall Street’s initial reaction suggested they should remain in wait-and-see mode.
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“We don’t think there’s much to be gained from trawling. [Harris’s] “Policy positions shifted during the 2020 primaries, particularly with a focus on social issues over economic policy,” Paul Ashworth, chief North American economist at Capital Economics, wrote.
Josh Shaffer is a reporter for Yahoo Finance. Follow him on X Follow.
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