Global markets experienced a positive shift following President Joe Biden's decision to withdraw from the 2024 presidential race and endorse Vice President Kamala Harris as the Democratic nominee. This move by Biden led to a surge in European stocks and a rise in morning trading in the US.
The Dow Jones Industrial Average increased by 123.7 points, representing a 0.3% gain. The S&P 500 also saw a rise of 0.7%, while the Nasdaq surged by 1.1%. European markets mirrored this upward trend, although Asian markets closed mostly lower. US Treasuries saw a slight increase, resulting in lower yields, and the dollar weakened against major currencies.
Concerns about Biden's ability to defeat former President Donald Trump prompted Wall Street to factor in a potential Trump victory in the upcoming election. This led to the initiation of 'Trump trades,' where investors favored stocks that could benefit from Trump's tariff-heavy policies while divesting from industries that might be negatively impacted, such as green energy.
Many economists have expressed apprehension that Trump's policies could exacerbate inflation and increase the US deficit. As Trump's prospects improved in recent weeks, US Treasury prices declined, causing yields to rise in anticipation of heightened inflation.
With the Democratic party rallying around Harris as the probable nominee, the dynamics of the market could shift, potentially leading to a reversal or temporary pause in the Trump trades. The future trajectory of these trades may depend on new polling data indicating Harris's competitiveness against Trump compared to Biden.
