On July 21st, current US President Biden announced his withdrawal from the 2024 presidential election.

Market performance calm

After the news of Biden's withdrawal was announced, there was no significant fluctuation in the market, and there was a strong wait-and-see sentiment.

Rafia Hasan, Chief Investment Officer of Chicago based Perigon Wealth, said, "The market dislikes uncertainty, and the unknown factors of Democratic candidates will certainly increase investors' anxiety. We don't know how the market will react to this news tomorrow and in the coming weeks, so investors should stay on the sidelines.

After Biden withdrew from the election, the US dollar slightly fell against major currencies in early Asian trading on Monday.

Meanwhile, all three stock index futures of the US stock market saw a slight increase. As of press time, S&P 500 futures have risen by approximately 0.4%, while Nasdaq 100 futures have risen by approximately 0.6%.

Jamie Cox, Managing Partner of Harris Financial Group, believes that "the market will be very unstable before the Democratic candidates are announced. This may be reflected through the US dollar, causing fluctuations in fixed income and stock markets.

In early trading in Asia, gold also saw a slight increase, with a rise of over 0.3%.

The market generally expects that if Trump wins the election, he will push for the depreciation of the US dollar. The weakening of the US dollar is usually beneficial for gold priced in US dollars. Moreover, the current turmoil in the US presidential election has intensified, with increasing uncertainty and investors' demand for safe haven, which in turn has driven up the price of gold.

Last week, gold prices hit a historic high as market expectations for the Federal Reserve to shift towards loose monetary policy increased. Lower interest rates are usually favorable for gold.

Prospects for the "Trump Trade"

The most concerning point in the market is who will receive the Democratic Party's candidate nomination, and the results are expected to be announced at next month's Democratic National Convention.

In his withdrawal statement, Biden stated that he will continue to complete his term and also expressed his support for Vice President Kamala Harris to replace him in the election.

According to media reports, former US President Obama praised Biden after his withdrawal, but did not directly support Harris for the Democratic nomination like Biden did.

This indicates that there are still differences within the Democratic Party regarding Democratic candidates, and these uncertainties have made the prospects of the 'Trump deal' uncertain.

In the showdown between Trump and Biden, Trump is considered to have a higher probability of winning the election, which has driven the rise of the "Trump Trade". But now Biden has withdrawn from the election, and the Democratic Party has not yet provided a clear direction for the candidate's nomination. This means it's hard to say who Trump will compete with, and the probability of Trump winning the election is still unknown.

The market generally believes that the fundamentals of the "Trump Trade" are to support the rise of US bond yields, the rise of banking, medical and energy stocks, and the strength of Bitcoin and the US dollar. However, Trump himself has stated that he would prefer a depreciation of the US dollar.

Yung Yu Ma, Chief Investment Officer of BMO Wealth Management, believes that "Trump Trade may come to a temporary halt until it becomes clearer who the Democratic candidate is.

In recent weeks, major sectors in the US stock market, especially small cap stocks, have responded positively to the prospect of Trump's election victory. Cryptocurrencies have also risen due to Trump's potential supportive policies.

Aptus Capital Advisors portfolio manager David Wagner said, "We may see a slight reversal in market trends over the past two weeks, with strong small cap stocks, but I don't think the market will give up all its gains. For the market, the bigger event is who will become the Democratic candidate because their policies and regulatory ideas will be more influential.“