Biden’s exit: market implications and investor moves

It was yet another blockbuster political weekend in the US, with markets now absorbing the news that President Joe Biden isn’t seeking re-election.

Uncertainty is prevailing and, as anticipated, investors have reacted by unwinding some “Trump trade” positions – namely, the shift in market behaviour and investor actions in response to the economic policies associated with a potential Trump presidency.

With Vice President Kamala Harris being a clear favourite amongst top Democrats, attention now shifts to how quickly and effectively her campaign could lift off.

Democratic donors are reportedly stepping up, with more than $50 million raised since President Biden announced his decision on Sunday afternoon in the US.

Global markets react to Biden exit

Asian markets opened lower to start the week as investors digested the news before the US heads to the polls in 105 days.

The Nikkei 225 closed down 1.26%, South Korea’s KOSPI was down 1.14% in afternoon trading, and the Taiwan Capitalization Weighted Stock Index closed down 2.68%.

In China, the People’s Bank of China cut short-term rates by 10 basis points, which pulled down long-term borrowing costs and bond yields. Investors were underwhelmed by the move, as it emphasised the persistent weakness in the economy. The Chinese SSE Composite Index closed down 0.61%.

In the UK, the FTSE 100 is expected to swing back into positive territory at the open, reacting to the developments across the pond. London’s blue-chip benchmark is tipped to jump over 50 points at the open, having finished last week at 8,155.72 with a drop of 49 points on Friday.

Over the next few weeks, the political landscape is likely to shift and evolve. Unless there is a clear-cut frontrunner across the swing states, we can expect the markets to be driven more by noise than signal.